InvestMacro

According to central bankers, the era of ultra-low inflation will not return soon

Federal Reserve Chairman Jerome Powell reiterated the Central Bank’s commitment to tighten monetary policy further to reduce inflation as GDP data showed a faster-than-expected decline in quarterly economic growth. Real gross domestic product (GDP) fell by 1.6% year-over-year in the first quarter of 2022. This situation led to a rise in the US Dollar Index and a decline in the major indices. As the stock market closed yesterday, the Dow Jones Index (US30) added 0.26%, while the S&P 500 Index (US500) decreased by 0.08%. The NASDAQ Technology Index (US100) fell by 0.03%.

The US Personal Consumption Expenditures Price Index, part of the Fed’s inflation tracking indicators, will be released today. Analysts expect the PCE to rise another 0.4%. In other words, experts do not expect inflation to slow down.

Equity markets in Europe traded lower yesterday. German DAX (DE30) decreased by 1.73%, French CAC 40 (FR40) fell by 0.90%, Spanish IBEX 35 (ES35) lost 1.56%, British FTSE 100 (UK100) closed on Wednesday down by 0.15%.

European Central Bank President Christine Lagarde said that the era of ultra-low inflation that preceded the pandemic is unlikely to return. Speaking at an ECB forum in Sintra, Portugal, along with US Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey, Lagarde added that central banks need to adjust to higher price growth expectations.

This week, a series of data on inflation rates in European countries will be released. Germany’s preliminary consumer price level was 7.6% year-over-year, down from 7.9% in May. But in Spain, the inflation rate jumped from 8.7% to 10.2% annually.

Morgan Stanley now expects the Eurozone to fall into a moderate recession in the fourth quarter of this year and show GDP contracting for the next two quarters before resuming growth in the second quarter of next year, driven by increased investment.

Predictions that the Eurozone will likely slip into recession because of energy security problems caused by the war in Ukraine prompted investors to buy the Swiss franc. The Swiss franc rose on Wednesday to its highest level against the euro in four months as growing fears of a recession in the Eurozone led investors to seek safe-haven assets.

Palladium increased by 6.2% yesterday, while nickel gained 9.2% amid UK sanctions against Russian billionaire and co-owner of Nornickel Vladimir Potanin.

Fears of a global slowdown continue to weigh on copper and the Australian dollar. Copper has long been known as a barometer for assessing the global economy’s health, and the Australian dollar has a high positive correlation with copper. If this week’s PMI data is worse than expected, copper could continue to fall.

The Energy Information Administration (EIA) did release new crude oil inventory data yesterday. Last week’s report was not published due to server problems. The US crude oil inventories have declined over the past two weeks, falling by 2.8 million barrels. But despite the decline in inventories amid strong demand, oil quotes were down by 2% yesterday as disappointing US GDP data counterbalanced the negative price sentiment. OPEC+ is meeting today, so volatility in oil prices will remain high.

Asian markets were trading lower on Wednesday. Japan’s Nikkei 225 (JP225) decreased by 0.91% yesterday, Hong Kong’s Hang Seng (HK50) ended the day down 1.88%, and Australian S&P/ASX 200 (AU200) lost 0.94%.

Industrial production in Japan fell by 7.2% in May from the previous month. Of the 15 industries surveyed, production declined in 13. The auto industry was hit the hardest due to parts shortages resulting from the COVID-19 blockage in Shanghai. Auto production fell 8.0% from the previous month, including a 33.2% drop in truck production.

China’s official PMI returned above the 50 levels. It suggests that China’s economy improved in June compared to May, but there are signs in the sub-indices that a full recovery will take some time. The headwinds remain, including a still depressed real estate market, low consumer spending, and fear of any recurring waves of infections.

S&P 500 (F) (US500) 3,818.70 −2.85 (−0.075%)

Dow Jones (US30) 31,027.92 +80.93 (+0.26%)

DAX (DE40) 13,003.35 −228.47 (−1.73%)

FTSE 100 (UK100) 7,312.32 −11.09 (−0.15%)

USD Index 105.12 +0.61 (+0.59%)

Important events for today:

– Japan Industrial Production (m/m) at 02:50 (GMT+3);
– China Manufacturing PMI (m/m) at 04:30 (GMT+3);
– China Non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
– UK GDP (q/q) at 09:00 (GMT+3);
– Eurozone German Retail Sales (m/m) at 09:00 (GMT+3);
– Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
– Eurozone French Consumer Price Index (m/m) at 09:45 (GMT+3);
– Eurozone German Unemployment Rate (m/m) at 10:55 (GMT+3);
– Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
– OPEC+ meeting (m/m) at 12:00 (GMT+3);
– US PCE Price index (m/m) at 15:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– Canada GDP (q/q) at 15:30 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News

30 Jun

3 potential opportunities in Q3

By ForexTime

– For Q3, investors and traders worldwide are set to continue obsessing about similar themes that have rocked markets so far in 2022:

Inflation
Rate hikes (or the lack thereof) by major central banks
Recession risks and how it impacts Wall Street earnings

As we count down the hours before the third quarter rolls along (and marvel yet again at how quickly time flies), let’s filter those three market themes down to how they might impact these major instruments/assets:

EURUSD
USDJPY
S&P 500

EURUSD to move lower and closer to parity?

EURUSD has been finding it hard to stay above its 50-day simple moving average – a key resistance level for the world’s most-traded currency pair over the past 12 months.

This downtrend in EURUSD reflects two major factors:

The US economy’s healthier outlook relative to the Eurozone’s. After all, there’s still the Russia-Ukraine war raging off to the latter’s eastern borders.
The Fed’s plans for more incoming rate hikes appears to be less risky than the European Central Bank’s.
The ECB is just only getting started, with two rate hikes slated for Q3. But markets fear that the incoming ECB hikes could inadvertently result in a sovereign debt crisis/fragmentation risks.

Overall, if the EU’s economic outlook turns darker than the US, which implies that the ECB can’t hike its benchmark rate as fast as the Fed, that could lead to more downward pressure on EURUSD.

If the above assumption holds, EURUSD could be dragged and kept below that psychologically-important 1.04 level in Q3.

At the time of writing, markets are forecasting a 72.5% chance that EURUSD could reach even parity sometime over the next 3 months!

Though to be clear, the same odds are placed on EURUSD recovering back to 1.09.

Much will depend on how much the outlooks differ between the US economy/Fed vs. Eurozone economy/ECB.

Key events to watch for EURUSD:

Economic data out of the EU and the US (especially the monthly consumer price index)
Market expectations for the July and September policy meetings for both the ECB and the Fed
August 25-27: Fed’s Jackson Hole Economic symposium – a key event which often sees the Fed offering a big signal to the markets about its policy outlook

2) USDJPY to climb above 140?

USDJPY has reached its highest levels since 1998, skyrocketing past previous peaks set in 2015 and also in 2002 with such ease.

The soaring USDJPY reflects the widening policy gap between the US Federal Reserve and the Bank of Japan.

In June, the Fed raised its benchmark rates by 75-basis points – its largest hike since 1994 – and now at 1.75%.
Meanwhile, the Bank of Japan appears content to keep its policy rate in negative territory, at minus 0.1%.

This divergence has also seen 10-year US Treasury yields soar past 3%, while Japan’s equivalent remains capped at 0.25% by the Bank of Japan.

In other words, global investors would be more enticed by the higher yields on offer in the US, creating more demand for the US dollar … as opposed to Japanese yields (less demand for JPY).

This divergence is set to persist in Q3 as well, which should translate into more upside for USDJPY.

Markets are forecasting a 74.7% chance that USDJPY could reach 144.93 over the coming months.

However, there’s also a similar-sized chance that USDJPY could plummet back down to 125.847, which was also its June 2015 peak.

A significantly lower USDJPY would require Japanese policymakers to stem the Yen’s declines, either by intervening in the FX markets or by way of the Bank of Japan shockingly pivoting to a hawkish tune (signal that it would start raising interest rates/raising its yield curve control targets).

Key events to watch for USDJPY:

What is said by officials out of the US Federal Reserve vs. the Bank of Japan
Yields in Japanese government bonds vs. US Treasuries

3) S&P 500 to fall deeper into bear market, reach 3500?

At the time of writing, the S&P 500 index – which is the benchmark used to measure the overall performance of the US stock market – is set to re-enter a bear market.

NOTE: A bear market means that the price of an asset has fallen by 20% from its recent peak.

Although fears of a US recession have been dominating market chatter of late, the S&P 500’s drop so far this year has yet to fully reflect such risks.

Stock bulls (those hoping that an asset’s price will climb) are hoping that US consumers are resilient enough to keep generating revenue and profits for these publicly-listed companies.

And this is where the upcoming US earnings season would play a pivotal part in the S&P 500’s performance.

If Wall Street can continue sounding optimistic about its earnings outlook, and markets can believe in such optimism, that could shore up support for the S&P 500.

However, the likelier scenario appears to point the S&P 500 closer to 3500 or lower in the second half of 2022, as markets brace for earnings downgrades and more warnings about a US recession, especially if the Fed is forced to trigger more larger-than-usual rate hikes in its battle against stubbornly persistent red-hot inflation.

Key events to watch for the S&P 500:

July 14th onwards: US earnings season
US economic data
What Wall Street’s C-suite and Fed officials say about the chances of a US recession

And as always, you can stay up-to-date on how markets are faring on a daily basis throughout Q3 and beyond by reading our Daily Market Analysis.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions

29 Jun

Mid-Week Technical Outlook: Pivot Points & Breakouts

By ForexTime

– A sense of unease lingered in the air on Wednesday as recession fears, jitters around soaring inflation, and concerns about aggressive monetary tightening left investors on edge.

Global stocks slipped amid the risk-off mood and growing caution ahead of today’s highly anticipated panel discussion at the ECB forum in Sintra, Portugal. In the currency space, the dollar was on standby while the euro appreciated against most G10 currencies. Oil benchmarks extended gains, lifted by supply worries while gold rose in range-bound trading with prices eyeing $1830.

As we head into the new trading month and second half of 2022, this could present fresh opportunities across the FX space. Today, we will use pivot points and moving averages among other technical tools to unearth potential setups on various currency pairs.

A pivot point is a technical analysis indicator used to determine the overall trend of the market over different timeframes. Pivot points have predictive qualities, so it is considered a leading indicator to traders. The FXTM pivot point indicator can be downloaded HERE.

GBPUSD breakdown on horizon

If you are looking for a bearish trend, then look no further.

The GBPUSD is under pressure on the weekly and monthly charts as there have been consistently lower lows and lower highs. Bears seem to be making a move on the daily charts as prices wobble above the 1.2150 support level. Given how the currency pair is trading below the weekly pivot and has already hit the weekly support level, further downside could be on the cards. A strong daily close below 1.2150 could trigger a selloff towards the S2 at 1.2088 and S3 at 1.2016.

The bearish trend is already defined on the weekly charts. A strong weekly close below 1.2150 could trigger a selloff towards 1.1930 and potentially lower.

A similar theme can be observed in the monthly timeframe. The GBPUSD has shed roughly 3.5% this month with the bearish candle likely to encourage further downside. Should 1.2150 prove to be tough support to crack, prices have the potential to rebound towards 1.2400 before bears re-enter the scene.

USDJPY bulls relentless

The USDJPY is on a path to hitting a new 24-year high beyond 136.70.

Prices are firmly bullish on the daily charts and have already hit the first weekly resistance level at 136.504. A daily breakout above 136.70 could inspire a move higher towards 137.831 which is where the second weekly resistance level resides. Should bulls run out of steam, prices could decline back towards the weekly pivot at 135.377.

Zooming out to the weekly charts, the USDJPY seems to be gearing up for another breakout. A strong push above 136.70 could trigger an incline towards 138.00.

AUDUSD ready to breakdown?

The AUDUSD weekly chart says it all. Prices are under pressure and trading below the 50,100- and 200-week Simple Moving Averages. Support can be found at 0.6850 while resistance can be seen at 0.7000. A strong weekly close below the 0.6850 support could trigger a selloff to 0.6650. If prices manage to push back above 0.7000, then the next resistance will be at the 200-week SMA at 0.7130.

EURJPY eyes 144.00 level

A possible breakout opportunity could be forming on the EURJPY. On repeated occasions, bulls have attempted to conquer the 144.00 resistance level with no luck. The currency pair could be waiting for a fresh directional catalyst before making its next major move. If bulls are able to secure a solid move above 144.00, this could trigger a rally to levels not seen since December 2014 around 146.50. Sustained weakness under 144.00 may encourage a decline towards 142.50 and 141.50, respectively.

NZDUSD destined to tumble?

All eyes will be on how prices behave around the 0.6220 support level which has been held on a couple of occasions. A strong breakdown below this point could encourage a selloff towards 0.6100 and 0.6030. A move back above 0.6300 may suggest an incline back towards 0.6370 and 0.6450.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions

29 Jun

Japanese Candlesticks Analysis 29.06.2022 (USDCAD, AUDUSD, USDCHF)

Article By RoboForex.com

USDCAD, “US Dollar vs Canadian Dollar”

As we can see in the H4 chart, after forming a Harami reversal pattern close to the support level, USDCAD may reverse in the form of another ascending impulse. In this case, the upside target may be the resistance area at 1.2985. Later, the market may break this level and continue growing. However, an alternative scenario implies that the asset may correct to reach 1.2800 first and then resume trading upwards.

AUDUSD, “Australian Dollar vs US Dollar”

As we can see in the H4 chart, AUDUSD has formed an Inverted Hammer reversal pattern near the support area. At the moment, the asset may reverse and form a new rising impulse. In this case, the upside target may be the resistance level at 0.6960. After testing the level, the price may rebound from it and resume the descending tendency. At the same time, the opposite scenario implies that the price may fall to reach 0.6835 and continue the downtrend without any corrections.

USDCHF, “US Dollar vs Swiss Franc”

As we can see in the H4 chart, after testing the support area, the pair has formed several reversal patterns, for example, Hammer. At the moment, USDCHF may reverse in the form of a new ascending impulse. In this case, the upside target may be at 0.9635. After testing the resistance level, the price may break it and continue trading upwards. Still, there might be an alternative scenario, according to which the asset may fall to reach 0.9510 and continue the ascending tendency only after the correction.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News

29 Jun

The cryptocurrency market digest (BTC, DOGE, TON). Overview for 29.06.2022

Article By RoboForex.com

And once again the BTC is very sensitive to mood swings in the US stock market. There is a correlation between S&P 500/NASDAQ and the BTC, which can be easily seen right now. This week, American exchanges are selling, so the major cryptocurrency has few chances to rebound.

The BTC is falling towards $20,080 on Wednesday, and it’s been the fourth negative trading session in a row.

There is no more upside target at $24,000-$25,000: despite positive conditions, bulls wasted a chance for a rebound. Considering negative forecasts for S&P 500 – some foreign experts believe it may plummet to 3,200 points – the outlook for the major cryptocurrency is rather gloomy.

The closest significant support for the BTC right now is at $19,000 – the decline towards this level is already a very negative vibe. Below it, there is the next support, the low reached in June, $17,622.

The Bitcoin Fear & Greed Index is 13 points today after being 10 points yesterday – it’s an Extreme Fear.

The BTC share in the crypto market is now 42.5%, and the ETH owns 15.3%.

Top 10: DOGE couldn’t stand ground

In the last 24 hours, all major cryptos from the Top 10 dropped in one way or another. The worst of them are SOL (-6.20%) and BNB (-4.53%). DOGE, which has been the strongest of them recently, lost 5.63%. Amid global depression, BTC, ETH, and ADA were better and lost about 2.5% on average.

TON switched to Proof-of-Stake

Yesterday morning, miners mined the last Proof-of-Work TON. The blockchain then switched to Proof-of-Stake to keep the ecosystem decentralisation principle. The token mining is officially over.

Article By RoboForex.com

Cryptocurrencies Financial News

29 Jun

2022 mid-year outlook – where do investors go from here?

By George Prior

Volatility will define financial markets in the second half of 2022, but there are major reasons for investor optimism, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

This is the upbeat assessment from deVere Group’s Nigel Green at the midpoint of the year as investors take stock of the past six months and look ahead to the last half of 2022.

He notes: “The first half of 2022 has been challenging, to say the least, for investors seeking both capital growth and capital protection.

“With soaring inflation, interest rate rises, slowing growth, the pandemic still not over, and geopolitical tensions including a tragic war in Europe, uncertainty has been heightened which has unleashed huge waves of volatility in financial markets.

“For many investors, it has been the perfect storm with both stocks and fixed income hit with simultaneous bouts of weakness, making proper portfolio diversification more difficult to achieve.”

He continues: “However, despite turbulence still being the defining characteristic of the second half of 2022, there are four key reasons why investors should be optimistic for the next six months.

“First, our latest thinking is that inflation could be peaking soon, and we expect it to decelerate through the rest of this year. History shows that the markets typically fall just before the peak in inflation, just as we have experienced in recent months. This will be bullish for stocks.

“Second, as markets continue to be unsteady in the near-term, investors will be using the downturn to their financial advantage by topping-up their portfolios with quality stocks at lower prices.

“The panic-selling has created some important long-term opportunities with high upside potential and low risk possibilities for those who buy judiciously.

“Third, China is beginning to loosen its strict Covid restrictions which will help ease global supply chain disruption, which is positive for companies and consumers.

“And fourth, financial markets have already priced-in much of the bad news from geopolitical issues, meaning there should be less wild swings in the months ahead.”

In this environment, the deVere CEO says investors wanting to safeguard and grow their wealth should be proactive. “You should be fully and sensibly invested in a properly diversified portfolio.

“Whilst you may be tempted to stash cash during periods of volatility, experience demonstrates that such attempts to ‘time the market’ almost always fail.

“You should resist complacency, be active, revise and adjust with an adviser to build a resilient and dynamic portfolio, perhaps with some less-traditional, return-enhancing assets.”

He concludes: “After a difficult start to the year, the rest of 2022 will remain volatile – but there’s much to be done to grow your wealth.

“This is the time to remain fully and cleverly invested.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Financial News

29 Jun

The Analytical Overview of the Main Currency Pairs on 2022.06.29

By JustForex

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.0582
Prev Close: 1.0520
% chg. over the last day: -0.59%

ECB head Christine Lagarde said nothing new in her speech at the Central Banks Forum. The net asset purchases will be completed on July 1. The ECB intends to raise interest rates in July for the first time in 11 years. The ECB will continue on the path of normalization and go as far as necessary to ensure inflation stabilizes at 2% in the medium term. Inflation in the Eurozone is projected to remain high for some time.

Trading recommendations

Support levels: 1.0498, 1.0573, 1.0408, 1.0379
Resistance levels: 1.0564, 1.0611, 1.0680, 1.0723

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price still forms a wide corridor, the MACD indicator has become negative, and new sellers’ initiative has appeared. Under such market conditions, sell deals can be considered from the resistance level of 1.0564, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.0498 or the lower border of the flat, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.0611 resistance level and fixes above, the uptrend will likely resume.

News feed for 2022.06.29:

– Eurozone Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
– US FOMC Member Mester Speaks (m/m) at 13:30 (GMT+3);
– Eurozone German Consumer Price Index (m/m) at 15:00 (GMT+3);
– US GDP (q/q) at 15:30 (GMT+3);
– US Fed Chair Powell Speaks (m/m) at 16:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks (m/m) at 16:00 (GMT+3);
– US FOMC Bullard Speaks (m/m) at 20:05 (GMT+3).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2264
Prev Close: 1.2183
% chg. over the last day: -0.66%

The Bank of England predicts that the UK economy will be negative in 2023, and KPMG predicts that the UK could fall into recession next year due to lower inflation. The Office for National Statistics reports that the average annual growth rate for the UK economy from 1998 to 2007 was 2.7%. From 2010 to 2019, it was 2%. The growth rate is projected to average up to 1.8% from 2023 to 2026. After the UK voted to leave the EU, there was a huge drop in investment, significantly affecting the pandemic recovery factor.

Trading recommendations

Support levels: 1.2171, 1.2093, 1.1974
Resistance levels: 1.2238, 1.2324, 1.2422, 1.2470, 1.2523, 1.2629

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is very similar to the euro. The price forms a wide corridor, while the MACD indicator does not show any activity, and there is a slight sellers’ pressure. Under such market conditions, sell deals can be considered from the resistance level of 1.2238 or the upper border of the flat at 1.2324, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.2171, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.2422 resistance level and fixes above, the uptrend will likely resume.

News feed for 2022.06.29:

– UK BoE Gov Bailey Speaks (m/m) at 16:00 (GMT+3).

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 135.43
Prev Close: 136.16
% chg. over the last day: +0.54%

The fundamental picture of the currency pair USD/JPY remains the same. The divergent policies of the central banks have already caused the yen to fall to 20-year highs against the dollar. And since no changes are expected soon, analysts expect the growth of USD/JPY quotes to continue. The only thing that can reverse the uptrend is a currency intervention by the Bank of Japan. There are already talks about it.

Trading recommendations

Support levels: 135.41, 134.84, 133.35, 131.67, 131.00, 130.12, 129.48, 128.76
Resistance levels: 136.66

The medium-term trend on the USD/JPY currency pair is bullish. There is a new initiative from the buyers. The MACD indicator has become positive. Under such market conditions, buy trades can be considered from the support level of 135.41, but with confirmation. A resistance level of 136.66 is good for sell deals, but only with additional confirmation and short targets.

Alternative scenario: if the price fixes below 133.35, the downtrend will likely resume.

News feed for 2022.06.29:

– Japan Retail Sales (m/m) at 02:50 (GMT+3).

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2873
Prev Close: 1.2876
% chg. over the last day: +0.02%

The Canadian dollar is a commodity currency, so it depends not only on the USD Index dynamics but also on the oil quotes. Both the dollar index and oil quotes increased yesterday. As a result, the price of USD/CAD started to form a corridor. It should be noted that both the Bank of Canada and the US Fed are on the way to raising the interest rates while oil prices remain high. All this suggests that no medium-term trends should be expected on the USD/CAD currency pair, as market conditions favor the strengthening of both the dollar index and the Canadian dollar.

Trading recommendations

Support levels: 1.2818, 1.2709, 1.2618, 1.2578, 1.2510
Resistance levels: 1.2887, 1.2956, 1.3068

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. But the MACD indicator became negative, and the price is trading below the moving averages. Yesterday the price reached the priority change level, but the buyers could protect their positions. Under such market conditions, it is better to look for buy deals in the lower time frames from the support level of 1.2818, but with confirmation. For sell deals, it is better to consider the resistance level of 1.2956, but it is also better with confirmation and short targets.

Alternative scenario: if the price breaks through and consolidates below the 1.2818 support level, the downtrend will likely resume.

There is no news feed for today.

By JustForex

Financial News Forex and Currency News

29 Jun

Investors once again fear a recession in the economy. The Monetary Policy Forum is coming to a close

By JustForex

The mood of investors and analysts changes almost every day. Yesterday, US stock indexes saw a new massive sell-off as gloomy consumer confidence data once again dampened investor optimism and heightened fears that the Federal Reserve’s aggressive fight against inflation will lead to a recession in the economy. The Conference Board’s Consumer Confidence Index fell to its lowest level since February 2021, and short-term expectations reached their most pessimistic level in nearly a decade.

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 1.56%, and the S&P 500 Index (US500) lost 2.01%. The Technology Index NASDAQ (US100) fell by 2.98%. At the end of the day, all three indices were down.

Federal Reserve Bank of New York President John Williams told CNBC on Tuesday that interest rates should “definitely” be between 3% and 3.5% by the end of the year, but he does not expect a recession in the United States.

Stock markets in Europe traded higher yesterday. Germany’s DAX (DE30) increased by 0.35%, France’s CAC 40 (FR40) jumped by 0.64%, Spain’s IBEX 35 (ES35) added 0.91%, and the British FTSE 100 (UK100) closed Tuesday in plus 0.90%.

The ECB is expected to follow its colleagues from the Fed and raise interest rates in July to try to curb skyrocketing inflation. However, economists disagree on the extent of any rate hike. For now, a 0.25% move is being considered, but if Friday’s Eurozone inflation data show a new acceleration in inflation, policymakers may reconsider their decision to 0.5%.

Today at the monetary policy forum in Portugal, there will be the final speech of the heads of the central banks of the US, the ECB, and the UK. Investors and traders should pay attention to this performance.

Crude oil prices jumped another 2% on Tuesday as Saudi Arabia and the United Arab Emirates indicated they are near maximum production levels.

On the other hand, the leaders of the G7 countries reached an agreement to impose a price cap on Russian oil.

Lithuania has officially banned imports of Russian gas. The Seimas of the republic has adopted the appropriate amendments to the law on natural gas.

Gold futures fell in price yesterday. Gold and silver are inversely correlated to the dollar index and government bond yields. When the dollar rises, gold and silver tend to fall. And while the US Federal Reserve tightens monetary policy, there is no fundamental reason for increasing precious metal prices.

Asian markets were trading higher on Tuesday. Japan’s Nikkei 225 (JP225) gained 0.66% yesterday, Hong Kong’s Hang Seng (HK50) added 0.85% on the day, while Australia’s S&P/ASX 200 (AU200) was up 0.86%.

The head of the Bank of Japan said today that the Japanese economy had not suffered much from the global inflation trend so monetary policy will remain soft.

The Chinese yuan rose after China eased the quarantine related to the COVID-19 pandemic for international travelers. It also became known that China will cut retail prices on gasoline and diesel starting on Wednesday.

S&P 500 (F) (US500) 3,821.55 −78.56 (−2.01%)

Dow Jones (US30) 30,946.99 −491.27 (−1.56%)

DAX (DE40) 13,231.82 +45.75 (+0.35%)

FTSE 100 (UK100) 7,323.41 +65.09 (+0.90%)

USD Index 104.48 +0.54 (+0.52%)

Important events for today:

– Japan Retail Sales (m/m) at 02:50 (GMT+3);
– Australia Retail Sales (m/m) at 04:30 (GMT+3);
– Eurozone Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
– US FOMC Member Mester Speaks (m/m) at 13:30 (GMT+3);
– Eurozone German Consumer Price Index (m/m) at 15:00 (GMT+3);
– US GDP (q/q) at 15:30 (GMT+3);
– US Fed Chair Powell Speaks (m/m) at 16:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks (m/m) at 16:00 (GMT+3);
– UK BoE Gov Bailey Speaks (m/m) at 16:00 (GMT+3);
– US FOMC Bullard Speaks (m/m) at 20:05 (GMT+3).

By JustForex

Economics & Fundamentals Financial News

28 Jun

Gold Miners Trading At Their Largest Discount

By Ino.com

– Amidst a backdrop of elevated inflation, near-record high gold prices, and negative real rates, many gold bulls are puzzled by the lack of upside follow-through in the Gold Miners Index (GDX). This is because, despite this favorable environment, the index is down 6% year-to-date and 40% from its Q3 2020 highs.

However, it’s important to note that the gold producers are up against significant headwinds which have dented margins, including higher labor, fuel, and materials costs. So, while they have historically performed well in this environment, some of the gold price’s upside has been offset by these rising costs.

Given that the GDX is littered with several high-cost producers with sub-par track records, this has weighed on the index’s performance, dragging down nearly all the stocks in the sector and the GDX.

The good news is that this 22-month decline (August 2020 – June 2022) has left some of the highest-quality miners sitting at their cheapest valuations since Q1 2020.

In this update, we’ll look at three miners that are not only less affected by the inflationary pressures but are trading at a significant discount to their historical multiples: Kinross Gold (KGC), Alamos Gold (AGI), and Wesdome Mines (WDOFF).

Kinross Gold (KGC)

Beginning with Kinross, the company is a 2.0-million-ounce producer with operations in Mauritania,
Brazil, Nevada, Alaska, and Chile.

The company has been performed the worst among its larger peers over the past year, punished by the acquisition of a development-stage project in Canada and after divesting its Russian assets this spring after the invasion of Ukraine.

While the latter development wiped out more than $1.0 billion in net asset value and 300,000 ounces of annual gold production, the company may be better positioned following the divestment, even if the assets were sold for less than fair value. This is because Kinross was not getting much value for its Russian assets (Kupol, Udinsk) anyways and can now command a higher multiple with an Americas-focused portfolio.

Understandably, investors are disgusted with the stock’s performance, with it down over 60% since Q3 2020. However, at current prices, the correction looks to be overdone.

This is because Kinross has historically traded at 7x cash flow and is currently trading at 3.5x FY2023 cash flow estimates ($1.20 per share). While I think 7x cash flow is a high estimate and 5.5x cash flow is more appropriate, this still translates to a fair value of $6.60 per share, or more than 65% upside from current levels.

It’s also important to note that FY2023 cash flow does not factor in any upside from its Dixie Project that it recently acquired in Canada, which looks to be home to 9+ million ounces of gold and could produce 425,000+ ounces per annum at sub $800/oz costs.

Source: Kinross Historical Cash Flow Multiple, FASTGraphs.com

With production not expected to begin until 2028 at Dixie, this asset has been discounted and Kinross doesn’t get much value for the asset. However, I see a fair value for this asset of $1.7 billion, translating to more than $1.50 per share in additional upside long-term.

While the stock’s 18-month fair value lies 65% higher, the stock has the potential to more than double long-term if it can execute successfully at Dixie. Given this deep discount to fair value combined with a 3.0%+ dividend yield, I see the stock as a steal at $4.00

Alamos Gold (AGI)

The second name worth watching closely is Alamos Gold, a mid-tier gold producer currently churning
out 450,000+ ounces per annum from its three operations in Canada and Mexico.

However, the stock has fallen out of favor recently, given that its costs have risen above $1,200/oz and are expected to come in at levels above the industry average in 2022.

While this certainly dampens the short-term margin outlook ($1,130/oz costs in 2021), Alamos will look like a completely different company by the second half of 2025. This is because it’s currently constructing its Phase 3 Expansion at its high-grade Island Gold Mine, which will push production from ~125,000 ounces per annum to 230,000+ ounces per annum.

Meanwhile, the company aims to construct a 4th mine in Manitoba (Lynn Lake), adding another
150,000 ounces per annum by 2026.

Source: Alamos Gold Growth Plan, Company Presentation

If Alamos was only a growth story, it would be unique, and we would already expect it to command a
premium multiple in a sector where growth is hard to find.

However, it’s important to note that this growth will be accompanied by significant margin expansion and a jurisdictional upgrade. This is because its Phase 3 Expansion which will nearly double throughput, is expected to contribute to sub $600/oz costs at Island.

At the same time, Lynn Lake’s costs should come in below $975/oz. The result will be a transformation from a 450,000-ounce producer at $600/oz margins ($1,800/oz gold price) to a ~750,000-ounce producer with $1,000/oz margins ($1,800/oz gold price.

Finally, it will see its exposure to Mexico (Tier-2 rated jurisdiction) dip from 30% to 20%. The result is a company that will enjoy expansion in its P/NAV multiple at the same time as its cash flow increases substantially.

Based on this outlook, I see a fair value for the stock above US$10.00 and view this pullback in AGI as a gift.

Wesdome Mines (WDOFF)

The final name becoming attractive is Wesdome Mines, a junior producer operating out of Canada with
one mine in Ontario and another in Quebec.

While junior producers are a dime a dozen, Wesdome is special given that it has two of the highest-grade gold mines globally, and it’s busy ramping up to full production at one of them (Kiena) over the next year.

Given its 10+ gram per tonne gold grades, it uses considerably less fuel and labor than its peers per ounce of gold produced, given that it’s moving less than one-sixth the rock volume given its grades.

Source: Highest Grade Gold Mines Globally, Company Filings, Author’s Chart

Wesdome’s steady ramp-up at Kiena means that while its costs may be above $1,100/oz currently,
they’re expected to slide to less than $825/oz by 2024.

Given this enviable position as a company with meaningful margin expansion on the horizon in a period of slight margin contraction sector-wide, I would view any pullbacks below US$8.00 (key technical support level) as buying opportunities.

Final Thoughts

With the gold miners trading at their largest discount to net asset value in two years, I see now as a favorable time to begin adding some exposure. Given KGC, AGI, and WDOFF’s improving margin profiles looking out to 2025, I believe they are three of the best ways to get exposure to the sector.

Disclosure: I am long AGI, KGC

Taylor Dart
INO.com Contributor

Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Gold Miners Trading At Their Largest Discount

Metals Opinions

28 Jun

Technical Analysis: Why You Should Expect a Popularity Surge

– Here’s when a “rebirth of interest” in cycles and waves occurs

By Elliott Wave International

You probably know that the term “technical analysis” refers to analyzing the behavior of financial markets themselves — such as the stock market — as opposed to “fundamental” analysis, which is based on news and events outside of financial markets.

Well, in recent years, technical analysis has been out of favor.

A classic Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, explains why:

When bear markets mature, technical analysis is all the rage. When bull markets mature, it is not even on investors’ radar.

The stock market had been in a bull market for more than a dozen years so newsletters based on technical analysis have struggled. You might catch a market technician getting interviewed on financial television or for a print article here and there, but most interviewees offered “fundamental” analysis or external reasons for their market forecasts. You see, “fundamental” analysis tends to be popular when the stock market is rising because people feel that the “machine of society” and the market are linked and they’re both humming along as they should. In bear markets, people start to feel that “fundamentals” failed them, so they turn to other forecasting tools.

This chart and commentary from Robert Prechter’s landmark book, The Socionomic Theory of Finance, reveals how the popularity of financial theories have waxed and waned with the trend of the stock market:

The chart shows that in times of increasingly positive social mood — such as the 1920s, the 1950s-1960s and the 1980s-1990s — people in the field of finance tend to believe in human rationality and humans’ ability to control social trends. In times of increasingly negative social mood — such as the 1930s-1940s, the 1970s, and the first decade of the 2000s — there is a rebirth of interest in non-rational human behavior and the existence of cycles, waves and even extraterrestrial influences such as sunspots.

You probably know that Elliott wave analysis is a form of technical analysis. It tracks the market’s pattern, which repeats in predictable ways.

If stock market prices continue to trend lower, expect a jump in the Wave Principle’s popularity.

Of course, you don’t have to wait to start using Elliott waves. In fact, individuals who were already following the message of the Elliott wave model were prepared before the downtrend started in the Dow Industrials and S&P 500 index in January.

Indeed, part 1 of the January Elliott Wave Theorist (published December 31, 2021) referred to an Elliott wave pattern when the publication said:

Diagonals occur at the end of larger sequences. If this diagonal proves true, the market is poised to roll over directly into a bear market.

Just two trading days later (Jan. 5), the Dow hit an all-time intraday high and then “rolled over.” The senior index has been trading lower since.

By contrast, a Jan. 5 article in the mainstream financial press was titled (Marketwatch):

Why the bull market will stay alive in 2022 …

The article referenced the comments of three market newsletter writers, and those comments largely centered on “fundamental” analysis, such as expectations for economic growth, earnings, pharmaceutical sales, General Motors’ development of electric vehicles and so on.

No analytical method is perfect, including the Wave Principle. However, over decades of meticulous market observations, Elliott Wave International has concluded that the Elliott wave model is the most useful analytical method available — in bull or bear markets.

If you’d like to delve into the details of the Wave Principle, you are encouraged to read Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market.

Good news: You can access the entire online version of the book for free once you become a member of Club EWI, the world’s largest Elliott wave educational community (approximately 500,000 worldwide members and growing).

A Club EWI membership is also free and unlocks access to a wealth of Elliott wave resources on investing and trading. All the while, you are under zero obligation as a Club EWI member.

Just follow this link to get started right away: Elliott Wave Principle: Key to Market Behavior — free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Technical Analysis: Why You Should Expect a Popularity Surge. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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