May is coming to an end and once again as investors set their eyes at the US non-farm payrolls. In the last few weeks, we have seen interest rate expectations drop because of a slowdown in economic recovery. Growth is dependent in large part on currency and commodity markets. The movement of index level values for both the euro and the dollar mirror each other in a fairly precise manner most of the time. The currency markets have a great deal of influence on stocks and precious metals alike, so what happens in these markets must be a regular part of any meaningful analysis of trends across the precious metals sector.
The rise in gold prices seen on Friday largely came at the expense of the greenback which saw steep declines into the weekend as concerns regarding growth prospects in the world’s largest economy weighed on sentiment. With Geopolitical turmoil in North Africa coming back into focus, traders continue to cite haven flows into gold as not only a safety play, but also as a hedge against inflationary pressures which seem to be taking root across the globe. And with no progress last week regarding the Eurozone debt crisis, investors remain cautious of any comments or developments from the region with gold seeking to benefit from a general reluctance of traders to hold US dollars.
The Euro staged a key technical breakout against the US Dollar, rallying despite continued fears over Greek fiscal solvency and threats to the euro zone. A key sentiment shift warns that the US Dollar could once again continue lower through short-term trade. And though the euro remains at risk due to troubles surrounding Greek fiscal aid, a busy week of economic event risk may actually leave EUR/USD risks to the topside through upcoming trade. The pair can move 100 pips on an unexpected official speech. Needless to say we advise caution amidst considerable uncertainty surrounding the single currency.
This Week’s Financial Main Events
Monday, May 30
U.S. Holiday; stock markets closed
World Economic Data
Canada GDP m/m
Canada Current Account
Japan Household Spending
Tuesday May 31
US Economics
Case-Shiller 20-city Index (March)
Chicago PMI.
Consumer Confidence
World Economic Data
Australia Building Approvals
New Zealand Business Confidence
Japan Household Spending
European Unemployment rate
Wednesday, June 1
US Economics
MBA Mortgage Applications
Challenger Job Cuts
ADP Employment Change
ISM Index
Construction Spending
Auto sales prior
Truck sales prior
World Economic Data
Australia GDP q/q
United Kingdom Halifax HPI m/m
Switzerland Retail Sales
Thursday, June 2
US Economics
Initial Jobless Claims
Continuing Claims
Factory Orders (APR)
Crude Inventories
World Economic Data
Australia Retail Sales
Australia trade balance
United Kingdom Construction PMI
Friday, June 3
US Economics
Change in Nonfarm Payrolls
Unemployment rate
Avg. Hourly Earnings (m/m)
Avg. Weekly Hours
World Economic Data
United Kingdom Services PMI
Technical Forex & Commodities Analysis
EUR/USD
It is shaping up to be another exciting week for the fast-moving European currency. A busy week of European employment, inflation, and Purchasing Manager Index data as well as US employment numbers likewise promises significant intraday volatility. Traders are likely to place extra emphasis on employment data out of Germany—Europe’s largest economy and recently the engine driving EMU growth. Consensus forecasts call for Germany’s unemployment rate to drop to its lowest levels since reunification, and lofty expectations leave plenty of room for disappointment. We have been calling for a substantial EUR/USD turn lower for some time now, but the most recent shift in sentiment leaves risks to the topside before we see scope for further reversal.
Stop Loss: 1.4344
Take Profit: 1.4067
Gold
Last week saw the price of gold advance, though the price movement is not as intense as previous bull runs seen last year. With the end of QE2 quickly approaches, traders and investors alike have continued to push prices higher. The Eurozone problems keep impacting the price of gold positively. If Greece thought all its troubles were over with the coming of the Apocalypse, it seems that for now it will have to deal with its problems after all. Last week saw the yellow metal break above the 76.4% Fibonacci retracement taken from the July and January troughs at $1515, after a 7% decline off the May 2nd highs. Friday’s dismal pending home sales numbers and lacklustre consumer spending data once again saw gold surge to $1535. The breach signals the resumption of Gold’s up-trend, with targets eyed higher at the $1565 level. Downside support rests at $1515.
Stop Loss: 1,515
Take Profit: 1,565
NZD/USD
The Kiwi gained 2.91 percent against the U.S. Dollar this week, despite a concerted shift to risk aversion by the broader markets as the European sovereign seemingly reached a tipping point. The key event this week that bolstered the NZD in trade against its American counterpart was a 2-year inflation expectation report issued by the Reserve Bank of New Zealand, which forecasted a 3.0 percent inflation rate over said time period. As risk sentiment is reignited, or as commodities push to return to their end-of-April levels, the Kiwi could find further support, as it is considered a commodity currency, similar to the Australian Dollar and Canadian Dollar. As the USD/NZD pair approaches the 0.8200 level, it is possible that traders take profits off the table, so we predict a slight pullback headed into next week.
Stop Loss: 0.8219
Take Profit: 0.8000
Published by www.SolidityBrokers.com
