The precious metal by definition, Gold, is on track to end August with a negative performance: from the initial level of $1.356, at the moment the commodity is trading way lower, at $ 1.313.
The reason way of this move, which led the price widely below the long term trend-line from September 2011 to October 2012, is linked to the market expectations of the Yellen speech on a likely rate hike, during Jackson Hole.
Following the Fed President’s words, briefly, the likelihood of a rate hike in the short term have increased and this led the rally of the USD and the consequent downside of the Gold, to the $1.308 low.
It is known indeed that the performance of the precious metal is closely linked to the bets on the short-term rate hike (two-years Treasury yield) and the recent Yellen’s words have done nothing but confirm that the hawkish statement had already been priced by the market.
Recent rumors about the failure of the negative rate strategy adopted by the major central banks, moreover, seems to confirm a new wave of monetary stimulus in the short term.
Despite this, however, from a comparative study between the price of the two-years Treasury and the price of Gold, additional losses could be expected: the performance of the Treasury is way down the post-Brexit high of 0,787%, while the precious metal is already traded above the pre-Brexit low of $1.251
Following a figure by Baker Hughes, on Friday for the first time from 9 weeks the rig count has not increased, and despite this both Oil benchmarks on both sides of the Atlantic Ocean has decreased.
WTI and Brent are currently trading respectively at $46.96bbl and $49.30bbl making a negative performance of 0,40% and 0,54% which seems mainly linked to a take-profit of the investors.
The Iraq’s output in the meantime has been revised upside and following a Reuters article, quoting two South Oil Company’s spokesman “In August the Iraq Oil export from south ports touched 3.205 million barrel @day, overcoming the average level in July”.
Regarding Iran, on the other hand, the Country has reiterated his willingness to cooperate with Oil producers in order to freeze the production exclusively if they will recover their market share. This means that discussion on an possible agreement could fail again, looking at the recent rumors of the major Oil producers on a necessary Iranian production cut.
Following recent news anyway, the Iranian prime minister will attend next meetings, so the hopes for an agreement remains alive.
The low volatility seems not to stop the upside move of the New Zealand Dollar against the USD, with the NZD/USD cross which is trading bullish at the moment way over the 50-EMA at 0.7318 making a 0.08% positive performance from the start of the London session.
Tuesday’s hawkish comments by the RBNZ governor Wheeler have been fundamental in supporting the bullish momentum of the pair, which seems to consolidate the 3 consecutive day upper move. In addition the uncertainty regarding the rate-hike seems to cap the recovery of the US Dollar.
What is going down consistently, on the other hand, is the volatility, which is precipitated intraday to a weekly minimum.
Good news for traders who, whit this prospective, have good chances to enter Long and gain some pip during the upper move, even if they have to keep an eye on the parabolic SAR index: the 16-hours gain could revert, ant that will be the perfect moment to liquidate all the long positions.
Meanwhile Fonterra has increased his forecast on the Milk payout of 50c, to $NZ4.75/kg, after the recent Milk price increase.
Consequently, the total payout of $NZ 5.30/kg represent a multi-year high, very close to the average breakeven levels.
On the upper side the area positioned at 0.7345-50 seems to be the first real hurdle to overcome, but which once broken could open the street t the 0.7395 resistance (22 May 2015 High).
Looking at the opposite side, the first significant support is positioned at 0,7300 (round number) which could be difficult to brake, at least for now.
The EUR/USD cross is moving higher from the opening of the European session, after the yesterday’s flat move, characterized by an initial drop recovered in the late session. The pair is trading at 1.1333 at the moment collecting a positive performance of 0,11% after having already touched the 1.1340 level.
The positive traction of the spot seems to be favored by the USD weakness, which remains cautious looking at the Friday Yellen’s speech at the Jackson Hole Symposium.
Today’s session will be characterized by the disclosure of the European Manufacturing and Composite PMI’s data, the last expected down 0.3 points to 52.9 in August, after the slight increase to 53.2 in July. An explanation for that is the slowdown of the manufacturing activity in August (from 52.0 to 51.5) caused by the decline of the orders in July. Also the PMI for the service sector is declining. All of this elements bring me to consider a general decline in the composite PMI in line with the historical value for the July-August period and consistent with the 0.3 growth of the Q3 GDP QoQ.
Another important event for today’s session is the consumer confidence in August which i think will be slightly higher, from -7.9 to -7.7. In the beginning of august this value has been negatively influenced by the increase of the oil price and the post-Brexit implications, but the labour market conditions and the positive sentiment of the investors should prevail, positively influence the consumer confidence.
Looking at the chart you can see that the braking of the 18 August high at 1.1367 moved the next resistance level at 1.1434, broken which the price could move to 1.1466. On the opposite side, the fist significant support level is seen at 1.1263 (50% Fibo level between the May-June downside movement).