Gold, the US dollar and euro all printed significant price extremes during this week as investors and speculators position in anticipation of the Fed rates announcement on December 16. We take a look some of the most interesting price charts.
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Monday November 30
Japan BOJ Gov Kuroda Speaks
Japan Housing Starts y/y (actual: -2.5% expected: 2.5% previous: 2.6%)
Europe German Retail Sales m/m (actual: -0.4% expected: 0.3 previous: 0.0%)
UK M4 Money Supply m/m (actual: 0.6% expected: -0.2% previous: -1.0%)
UK Mortgage Approvals (actual: 70K expected: 70K previous: 69K)
US Chicago PMI (actual: 48.7 expected: 54.3 previous: 56.2)
US Pending Home Sales m/m (actual: 0.2% expected: 1.6% previous: -1.6%)
Japan Capital Spending q/y (actual: 11.2% expected: 2.3% previous: 5.6%)
Tuesday Dec 1
China Manufacturing PMI (actual: 49.6 expected: 49.9 previous: 49.8)
China Non-Manufacturing PMI (actual: 53.6 previous: 53.1)
Japan Final Manufacturing PMI (actual: 52.6 expected: 52.8 previous: 52.8)
China Caixin Manufacturing PMI (actual: 48.6 expected: 48.3 previous: 48.3)
Australia Cash Rate (actual: 2.00% expected: 2.00% previous: 2.00%)
Australia RBA Rate Statement
Australia Commodity Prices y/y (actual: -22.0% previous: -20.2%)
Switzerland GDP q/q (actual: 0.0% expected: 0.2% previous: 0.2%)
Switzerland Manufacturing PMI (actual: 49.7 expected: 50.8 previous: 50.7)
Europe German Final Manufacturing PMI (actual: 52.9 expected: 52.6 previous: 52.6)
Europe Final Manufacturing PMI (actual: 52.8 expected: 52.8 previous: 52.8)
Canada GDP m/m (actual: -0.5% expected: 0.1% previous: 0.1%)
New Zealand GDT Price Index (actual: 3.6% previous: -7.9%)
US Final Manufacturing PMI (actual: 52.8 expected: 52.6 previous: 52.6)
US ISM Manufacturing PMI (actual: 48.6 expected: 50.6 previous: 50.1)
US Construction Spending m/m (actual: 1.0% expected: 0.5% previous: 0.6%)
US ISM Manufacturing Prices (actual: 35.5 expected: 40.0 previous: 39.0)
US Total Vehicle Sales (actual: 18.2M expected: 18.0M previous: 18.2M)
Wednesday Dec 2
Australia GDP q/q (actual: 0.9% expected: 0.7% previous: 0.3%)
US ADP Non-Farm Employment Change (expected: 191K previous: 182K)
Canada BOC Rate Statement
Canada Overnight Rate (expected: 0.50% previous: 0.50%)
US Crude Oil Inventories (expected: -0.6M previous: 1.0M)
Thursday Dec 3
Australia Trade Balance (expected: -2.61B previous: -2.32B)
China Caixin Services PMI (expected: 53.1 previous: 52.0)
Europe Final Services PMI (expected: 54.6 previous: 54.6)
UK Services PMI (expected: 55.1 previous: 54.9)
Europe ECB Press Conference
US Unemployment Claims (expected: 269K previous: 260K)
US Final Services PMI (expected: 56.5 previous: 56.5)
Friday Dec 4
Japan Consumer Confidence (expected: 41.8 previous: 41.5)
Europe German Factory Orders m/m (expected: 1.3% previous: -1.7%)
Switzerland CPI m/m (expected: 0.0% previous: 0.1%)
Europe Retail PMI (previous: 51.3)
Global OPEC Meetings
Canada Trade Balance (expected: -1.7B previous: -1.7B)
Canada Unemployment Rate (expected: 7.0% previous: 7.0%)
Canada Labor Productivity q/q (expected: 0.2% previous: -0.6%)
US Non-Farm Employment Change (expected: 201K previous: 271K)
US Unemployment Rate (expected: 5.0% previous: 5.0%)
US Trade Balance (expected: -40.6B previous: -40.8B)
Canada Ivey PMI (expected: 55.3 previous: 53.1)
Gold dropped to a 2015 low on Thursday while the US Dollar Index achieved a new multi-month high. The EUR/USD forex pair and Brent Crude oil (even as OPEC are meeting) both made closing lows for the year during the past few days.
Gold (XAU/USD) dropped to $1,047/oz – its lowest level since Febrauary 2010.
The price pattern appears to be an ending diagonal that, according to the market consensus wave count, has now made a final low at label “v”. Label “v” also concludes wave “5” to the downside which, in turn, is the termination of Primary degree wave C. Most analysts expect that gold will now begin a rally in Cycle degree wave 5 to new highs, exceeding the 2011 top near $2000.
There are some alternate wave counts and analysis outlooks for gold that imply the decline in gold is not over, but for now a rally of at least $100 seems probable. Speculators are reminded to avoid attempts to “pick the bottom” and to, instead, open long positions when the chart indicators confirm advance.
The US Dollar’s push to a new high is, of course, a function of the market’s expectation that rates will increase during the coming months (but this month specifically), and of global money flow that has the US Dollar as its main beneficiary.
The combination of money inflows to the US and with most of the US Dollar’s forex counterparts being actively devalued by their respective central banks (e.g. euro, yen, yuan), the implication is that the US Dollar could continue appreciating for years to come.
The 1-hour candle chart of the Dollar Index shows that the dollar may be approaching a wave ending. It can be expected to correct as deeply as the 96.5 level (magenta arrow) before resuming a thunderous third wave of advance.
Brent Crude oil is suffering the same declining fate as all commodities. A global slow-down in production, combined with disinvestment of QE dollars from the emerging markets (that mostly produce commodities) means investor money is converted to cash or channeled to stocks and bonds. The slow-down means less economic activity and therefore less actual and anticipated oil (petroleum) consumption.
OPEC members are currently meeting (with sweaty palms and furrowed brows) to address the slumping oil price. They may find a short-term fix, but long-term there is just no magic trick for cranking commodity prices during a global recession.
Technology stocks have just kept on appreciating in since the 2008 credit crunch. Google, Apple and Facebook have never had it better. Even Microsoft, after its 1980s monopoly business model fell out of favor, has been able to come out the woodwork and carve some market space.
Silicon Valley is a hub of technological innovation and success – and provides us with most of the bitcoin service companies in popular use.
For as long as central banking can prevent a credit collapse the Nasdaq and other US stock markets will continue their advance. (The latter statement does not factor in the fundamental necessity of electricity and global connectivity).
Bitcoin has speculative cycle all of its own. The prospects of a strengthening US Dollar and another large bitcoin price rally (at some point in the coming months or years), means that, for the foreseeable future, the assets of choice are bitcoin and USD (NB: cash notes, not digits in a failure prone bank).
The dollar and bitcoin may rally and correct at different times in the coming years, but holding both allows speculators to benefit from both an appreciating US dollar (long-term) and from a spectacular bitcoin rally when it manifests.
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The writer trades Bitcoin. Trade and Investment is risky and subject to probability and market changes. CCN.LA accepts no liability for losses incurred as a result of anything written in this report.
Charts from TradingView, financial data & cartoon from Investing.com, image from Shutterstock.
Last modified (UTC): December 3, 2015 14:57