Metals Rebound Amidst USD Weakness
The metals market is seeing better demand across the Europeanopen on Monday. On the back of the sustained selling we saw last week, bothgold and silver are trading in the green so far today as the backdrop of aweaker US Dollar helps lift sentiment towards metals. Gold and silver have beenknocked firmly lower over recent months amidst the ongoing rally in USD. Withthe Fed’s action and outlook turning increasingly hawkish, USD has been on afirm upwards run.
Last week, June CPI coming in at 40-year highs (9.1% annually)spiked a fresh rally in USD as traders began mulling the prospect of an evenlarger 1% hike this month. However, comments later in the week from Fed’sWaller and Bullard appeared to push back against the need for a larger-than-.75% hike. Despite Friday’s June retail sales coming in above expectations also,the market appears to be focusing on these Fed comments for now. The reactionin USD shows the level to which hawkish Fed expectations have built up in themarket ahead of the July FOMC next week.
Looking ahead this week, we have further Fed commentary tomonitor along with PMI data t the top of the week. If the prospect of the Fedopting for a larger 1% hike falls further rout of focus this week, USD is likelyto remain pressured, allowing metals room to rebound. However, with equitiesprices surging higher, the upside in metals will likely be somewhat limited astraders chase gains elsewhere.
Technical Views
Gold
The sell-off in gold prices has seen the market continuing lowerwithin the broad bearish channel which has framed price action over the declinefrom the year’s highs. Price recently broke down below the 1791.63 level and isnow hovering on support around the 1722.37 level. With both MACD and RSIbearish, there is risk of further losses towards the 1679.77 level next. To thetopside, bulls need to see a break of the channel top and 1791.63 level toalleviate bearish pressure.
Silver
As with gold, silver prices have been trending lower this yearwithin a large bearish channel. The market is currently sitting on support atthe 18.4421 level. With both MACD and RSI bearish, the focus is on a furtherbreak lower near-term. However, if bulls can get back above the 19.5643 leveland channel top, this can affect a shift in momentum, putting focus on a testof 20.6398 above.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.