Gold Price Weekly Outlook: XAU Breakout Trade Faces First Test

Gold Price Weekly Outlook: XAU Breakout Trade Faces First Test

Gold has surged more than 2.8% off the yearly lows with price now testing initial resistance targets. These are the levels that matter on the XAU/USD weekly chart.

In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Gold prices surged more than 1.1% this week after a strong reversal off confluence support. The advance is now testing initial resistance objectives with our focus on the weekly close. These are the updated targets and invalidation levels that matter on the XAU/USD weekly price chart heading into June trade. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this setup and more.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold Weekly Price Chart (XAU/USD)

GLD

Notes:In my last Gold Price Weekly Outlook we noted that the, “immediate focus is on the weekly close in relation to the 1275/76 zone. From a trading standpoint, a good spot to reduce short-exposure / lower protective stops.” Price continued to respect this support threshold on a close basis for the past seven-weeks with XAU/USD briefly registering a low at 1275 on Thursday before reversing sharply higher.

The advance is now testing resistance at the 2018 open at 1302and a weekly close above this threshold is needed to suggest a more significant reversal is underway targeting the 61.8% retracement of the yearly range at 1316 and the yearly high-week close at 1327. Key confluence support remains at the 1275/76– a weekly close below is still needed to fuel another leg lower with such a scenario targeting more significant support / broader bullish invalidation at 1253/58.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line:Gold prices remain constructive while above 1275/76 heading into the open of June trade with a weekly close above 1302 needed to fuel the next leg higher in price. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Be on the lookout for weakness early in the month to offer more favorable long-entries targeting a breach of the May range. I’ll publish an updated Gold Price Outlook once we get further clarity in near-term price action. Review our latest Gold 2Q forecasts for a longer-term look at the technical picture for XAU/USD prices.

Even the most seasoned traders need a reminder every now and then-Avoid these Mistakes in your trading

Gold Trader Sentiment

Gold

  • A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +2.76 (81.2% of traders are long) – bearish reading
  • The percentage of traders net-long is now its lowest since May 15th
  • Long positions are 12.5% lower than yesterday and 10.7% lower from last week
  • Short positions are 15.7% higher than yesterday and 14.6% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and therecent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

Previous Weekly Technical Charts

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— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

AUD/USD Rate Outlook Hinges on RBA Amid Bets for 25bp Rate Cut

Australian Dollar Talking Points

AUD/USD appears to be stuck in narrow range ahead of the Reserve Bank of Australia (RBA) meeting on June 4, but fresh developments coming out of the central bank is likely to shake up the near-term outlook for the Aussie Dollar exchange rate amid bets for a 25bp rate-cut.

Fundamental Forecast for Australian Dollar: Neutral

AUD/USD holds above the monthly-low (0.6865) despite signs of slowing activity China, Australia’s largest trading partner, and the exchange rate may continue to congest over the coming days as the RBA insists that ‘a further decline in the unemployment rate would be consistent with achieving Australia’s medium-term inflation target.’

It remains to be seen if the RBA will reduce the official cash rate (OCR) to a fresh record-low as recent data prints indicate a robust labor market, and Governor Philip Lowe & Co. may merely attempt to buy more time as ‘the central forecast scenario remained for progress to be made on the Bank’s goals of reducing unemployment and returning inflation towards the midpoint of the target.’ In turn, more of the same from the RBA may ultimately keep AUD/USD afloat as the central bank appears to be in no rush to reestablish its rate cutting cycle.

Cash

However, it seems as though it will only be a matter of time before Governor Lowe & Co. take additional steps to insulate the economy as officials retain a dovish forward-guidance and insist that ‘without an easing in monetary policy over the next six months, growth and inflation outcomes would be expected to be less favourable than the central scenario.

With that said, the RBA may take a preemptive approach in managing monetary policy especially as the U.S. and China struggle to reach a trade deal, but the recent rebound in AUD/USD appears to be shaking up market participation, with retail sentiment coming off an extreme reading.

AUDUSD

The IG Client Sentiment Report shows65.9%of traders are now net-long AUD/USD compared to 69.4% earlier this week, with the ratio of traders long to short at 1.94 to 1. In fact, traders have been net-long since April 18 when AUD/USD traded near 0.7160 even though price has moved 3.4% lower since then.

The percentage of traders net-long is now its lowest since Apr 19 when AUDUSD traded near 0.71507. The number of traders net-long is 3.1% lower than yesterday and 12.3% lower from last week, while the number of traders net-short is 10.4% higher than yesterday and 65.7% higher from last week.

The tilt in the sentiment index offers a contrarian view as AUD/USD continues to track the bearish trend from late last year, but the jump in net-short position suggest the retail crowd is positioning for range-bound conditions as the exchange rate fails to extend the rebound from the monthly-low (0.6865).

AUD/USD Rate Daily Chart

AUDUSD

Keep in mind, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7130), with the exchange rate marking another failed attempt to break/close above the moving average in April.

In turn, AUD/USD remains at risk of giving back the rebound from the 2019-low (0.6745) as the wedge/triangle formation in both price and the Relative Strength Index (RSI) unravels, with the Fibonacci overlap around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement) still on the radar the exchange rate struggles to push back above the 0.6950 (61.8% expansion) pivot.

Next downside hurdle comes in around 0.6730 (100% expansion), but will keep a close eye on the RSI as the oscillator bounces back from oversold territory, with the development raising the risk for a larger rebound in the aussie-dollar exchange rate.

Additional Trading Resources

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Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

Larry Parks: Pensions Are in Serious Trouble; Money Managers Call Gold “Shiny Poo”

Larry Parks

Mike Gleason: It is my privilege now to welcome in Lawrence Parks, founder and executive director of the Foundation of the Advancement of Monetary Education. Larry has dedicated much of his life towards the study and promotion of sound money, having author articles that have appeared numerous times in publications like The Economist, The Washington Times, National Review, and The Wall Street Journal just to name a few. He even hosts a weekly TV show that airs on cable networks in the Manhattan area called “The Larry Parks Show”. He is given expert testimony in Washington to the United States Congress on monetary policy. He’s a real champion for sound money, and it’s great to have him on with us today.

Larry thanks for the time and welcome. It’s good to talk to you.

Larry Parks: It’s a pleasure. Thank you for hosting this.

Mike Gleason: Well Larry, to set the stage here briefly give us some background about the Foundation of the Advancement of Monetary Education and what motivated you to take the helm of the organization nearly 25 years ago, let’s start there.

Larry Parks: I had been in the money management business and I had noticed along the way that I was getting severe distortions in the evaluation of the stocks that we used to cover. And I had known about the money issue, I had studied at one point with Murray Rothbard. And it wasn’t my intention right from the very beginning to do this. I tried to get other charities, other think tanks, to pay attention to this and nobody would touch it. Turns out there’s a good reason for that. Somebody suggested to me along the way “Why don’t you do it?” And I ended up doing it.

When we got started, we had all of the work that Committee for Monetary Education and Research did. (They) had several hundred monographs, a couple of which were authored by me. We had all that digitized. The people at The Foundation for Economic Education, that was Harry Stendhal’s at the time. They had all the work of Henry Hazlitt, I don’t know if you remember that name.

He was from The Times. He wrote a book called Common Sense Economics and stuff on gold, made all that stuff. I recruited 30 some odd board of advisers and board members, some of them had world-wide reputations, and we were off and running. And I thought that the gold space, especially the gold companies would sponsor our work but that never happened. It’s very interesting how the people on the other side, on the paper money side were able to co-op just about everybody and promulgate this, what I call this imaginary fake money into society on a worldwide basis. It’s just utterly remarkable they got away with this.

Mike Gleason: Now you’ve made the point that gold is the most important of all the commodities in the world, even more so than oil. Explain why you believe that to be the case if you would please?

Larry Parks: The reason gold is the most important commodity is that gold is the only way to ensure payment. And so the way I like to explain it is that the glue that holds society together is keeping promises. So for example I make up with you I’m going to be available at 3 o’clock today if I don’t keep my promise that hurts the relationship.

But the promises that are most important to society, aside from the promises that we make to family and friends, are the promises to pay. To pay pensions, to pay annuities, to pay savings, to pay rents, whatever. If those promises get broken society unravels. And so, what happens is that people who have promises of payment take pensions for example, pensions are really differed wages, they depend on that promise being kept. And in turn they make promises to other people mindful that they’re going to get paid. If that chain gets broken all of the inter relationships in society down and we’ve seen examples of that from all recorded history. The thing about gold is that gold is the only way to ensure payment over a long period. People think about gold as money they think about going to the grocery store, that’s absurd. Nobody would use gold for day to day transactions. Gold is important for payment into the future. And so, whatever it is that you use as money, say for example you use water, some of that water is going to spill. In the case of gold you have no spillage.

The guy who really put his finger on this the best is a guy named Carl Menger. He’s part of the so-called Austrian School of Economics picked up on Von Mises by Rothbard and others. And what they said was that gold is the sellable, most efficient money. And the way they measure that, and it’s really ingenious, if you look at all the things that could possibly be money and the things that have been money-like salt, cattle, copper, steel, all kinds of stuff- and you line them all up and you offer ever increasing amounts of each into the marketplace, the commodity for which the by sale spread increases the least that’s the most efficient money. And it just so happens that’s gold. No matter where you drop in in history, either in ancient times or Renaissance times, today, say in the 19th century, cross culture, cross time you see people using gold as money when it’s available. So it’s not like someone came down from the heavens and said “Look in China, in the Mideast, in Europe you have to use gold.” Somehow by trial and error they just figured out that gold is the most efficient money. But again it’s the key to holding society together.

Mike Gleason: Our listeners know that the market had chosen gold as the best form of money for thousands of years as you’ve just explained, but it hasn’t been openly used as money in recent decades. Talk about how and why gold was booted out of the world’s monetary system, at least officially.

Larry Parks: Well, what’s happened and this also goes back to ancient times, it was generally the rule of rulers of countries that said what the money was going to be. Best case is when the people themselves decided what the money was going to be, but a lot of times the rulers of those countries got involved with coinage. They put their images on it. They set the standards, but a long time ago people at the top of the heap figured a good way to steal was to debase the coinage. So in Renaissance times, when they started having precious metals as money, they used to clip the coinage. In modern times they figured out with things like factional reserve lending that they could really, in effect, debase the money completely. The problem with gold from that point of view is that gold protects the money.

So, if you have gold you have what you have. The way I like to say there’s no counterparty risk with gold. With everything else you have counterparty risk that somebody will do something that will damage the value of your currency. For example, if I pay you with a check, Mike, you have counterparty risk that the check may not be good. And if I pay you with a dollar, that we call a dollar today which is not a dollar, but what I call a dollar today you have counterparty risk that the issuing authority in our case it’s the banking system, the Federal Reserve and the banks, will depreciating the purchasing power of that money. And they tell you right out that they’re going to do that. The jargon for that is called inflation targeting. And see, you’re always at risk that after some long period you’re not going to have what you think you have, or you’re not going to get paid what you think you’re going to get paid.

However with gold it is what it is. By getting rid of gold they’re able, in effect, to engage in really a massive amount of thievery under the color of law of course where they transfer the wealth of society from the people who earn it — mostly ordinary working people — to the people who are in charge of the monetary system. We’ve developed on this end of the phone data from primary sources in this case the Federal Deposit Insurance Corporation, they have on their website one line for each year going back to 1934 when they got started of all the banking statistics. And up until the last tie to gold was broken, and that was in 1971, the money that went to the banks… and I can send anybody a chart on this if they wish just send me an email [email protected]… it was a small amount of money. It was a sum number of billions. Since the last tie to gold was broken in 1971 it’s in the trillions. Trillions. In dividends to their shareholders and in trillions in compensation to their employees. That would not be possible with gold.

Also, in the sense of the politicians there’s a very important book that people should take the time to read. It’s called “Fragile By Design” it’s by a Columbia Professor and his partner at, I think University of California by the name Steven Haber. It’s called “Fragile By Design” and they document very nicely that there is, on a world-wide basis what they call a grand bargain between the banking systems and the monetary authorities and banks in effect of paper money. When you have paper money you can have unlimited spending. So a lot of people complain about the deficit, about debt and what not. Well with paper money there is no limit to how much money you can spend. And if you have unlimited spending you get unlimited government. And if you have unlimited government the people in charge have unlimited power, they like that. Gold stands in the way. So, what they’ve done at this end in our country is, even though the Constitution guarantees us promises as gold and silver coin as money they’ve pretty much got gold out of the system and they’ve done it right from the get-go. Right from the time right after the Revolution. There’s a ton of stuff from 19th century where they recognize that gold is antagonistic to the paper money. And of course, the way they get you to use it is they force you to use it with what’s known as legal tender laws. Again another abomination.

Mike Gleason: There was a recent documentary financed and distributed by The Financial Times and in that piece one of their experts says gold is like “shiny pooh”. He goes on to say that “People who like gold are people who like to play with their pooh.” A silly comment to say the least but on a serious note, how do you explain the disdain for golf among financial elites Larry? Because this individuals comments are quite often shared by many.

Larry Parks: I can explain it in four words: gold pays no fees. So the people in the financial world especially on Wall Street, Wall Street is a fee business. So, when people have savings, and a lot of people are concerned, especially people who are at the upper end, they’re concerned about inter-generational wealth transfer, leaving money to their kids. People who retire, who are facing retirement, or plan to retire, they have and issue “How should I allocate my money?” And as far as Wall Street is concerned they want you to allocate it in a way that generates fees for them.

In the case of gold really the best thing that people can do for savings for the future is to buy gold, my favorite are U.S. Gold Eagles, and put them away. But if you do that where are the fees for Wall Street? And so, what they’ve done, it’s really incredible what they’ve gotten away with in the pension business. For example, in defined benefit pension plans in America there are roughly ten trillion dollars’ worth of investible assets. Ten trillion. And no gold. The only gold position that I can identify is the Texas Teachers Retirement System. They have a billion dollar position in physical gold out of roughly one hundred and forty billion dollars of investible assets but in the other ten trillion there’s no gold. And they have roughly something on the order of twenty some odd percent, last I looked around twenty-four or twenty-five percent of these assets in fixed income, these are Government bonds and court bonds, on the theory that people are safer.

In fact, the icon of American investing, that would be Warren Buffett, he said in one of his chairmen letters from his Berkshire Hathaway company followed up with an article in Fortune Magazine that the most unsafe, the most risky assets are currency denominated assets, and he specifically targets bonds. And the reason they’re unsafe and risky, the only risk you have to be concerned about is that at the end of the holding period that you have less purchasing power than when you started. The answer is that things like fixed income, that’s a guaranteed loser.

So how do you explain that you have ten trillion dollars, you have roughly two and half trillion dollars in the most risky most unsafe investment and no allocation to gold. And of course, the answer is, as I’ve said, gold pays no fees. So really what you have here is really cheating people on a massive scale, I mean it’s unbelievable how they’ve gotten away with this. In the last couple years there’s been talk about having these investment advisors having a fiduciary responsibility to their customers, and they defeated that. So basically, the way Wall Street works is that they’re in it for the fees. If the customer gets a good result, that’s a happy accident. So today… and I’ll tell you Mike it’s an incredible scandal, it doesn’t get enough press… there’s one hundred and fifty of these so-called multi-employer pension funds that are on the Department of Labor critical list which is to say they’re bust. And millions of workers are involved, what’s their remedy? What should these people do when they turn 65 or 70, whatever, and they can’t work anymore and their bodies are broken from the work that they used to do and they have no money, how are they supposed to live?

So really what’s happening in the country today is that there is, I perceive, a huge lean towards socialism. My view we are at best two election cycles, maybe one election cycle, away from the country going socialist. I don’t know how many people watched the State of The Union Address by President Trump, but he went out of his way to say in very strong terms he said, “We’re not going to have a socialist country.” Now you never heard any other President say something like that. The fact that he felt compelled to say that, they recognize also that there is this lean towards socialism. That would be an enormous tragedy, we are on the glide path right now to Venezuela.

Mike Gleason: Switching gears here a little bit, you talk to mining executives and you have your finger on the pulse there, so I want to ask you, do you think they believe there is price suppression in the metals’ markets? And as a follow up, if they believe there is – which to us seems hard to deny at this point – why don’t mining executives cry foul? Because it seems as though their companies would be the most impacted. Is it that they just don’t want to call out the very banks that they’re so depended upon for credit, or is it something else? Because the lack of an outcry for mining leaders has always baffled me Larry.

Larry Parks: Well, it’s not only baffling although I’ll give you an explanation for it, but it’s disheartening. These folks have fiduciary responsibility to their shareholders and also to themselves. Except for people like Rob McEwen, very good guy, and Rudi Fronk. Rob McEwen has McEwen Gold, Rudi Fronk at Seabridge. Very few have any kind of material interest in the companies at all. They’re in it for the payroll. In their defense, and it’s not a great defense but it is a defense, they don’t know anything about this business with gold and the monetary system. These guys, I don’t think there’s any women running any of these companies anymore. There was one woman and I think she sold out to Barrick some time ago. I forget her name. But basically, these people went to the Colorado School of Mines or its equivalent. Some of them have accounting degrees and that’s it. Also until recently none of these people were from America. So if you look at all the major gold companies, important gold companies, they were all headed by foreigners. So they don’t know anything about the constitutional issues here in America. Why would they?

So right now you have two. You have this fellow John Thornton who just took over a couple years ago at Barrick Gold. He’s an American. And Gary Goldberg who runs Newmont. But before Thornton took over it was Peter Munk. Peter Munk came from Hungary, grew up in Hungary, educated in Switzerland, considered himself a Canadian. Newmont was Jimmy Goldsmith, a Brit. And all the rest are from other parts of the world. No one knows anything about the provisions, the history and it’s really America that’s lead the way on this, not any other kind of country. There’s all a story to this, and I know we only have a few minutes for this podcast, but back in 1944-45 when the Bretton Woods Conference met really the dye was set there to get gold completely out of the system. Roosevelt did his part in 1933, but after Bretton Woods the idea was that the United States dollar would be convertible into gold for foreign governments and foreign central banks. At that time it was still a felony for Americans to own gold. That’s an interesting question you don’t get an answer to.

What is the public policy justification for making gold ownership in America a felony? I mean where have you seen that question asked in any economics textbook? Basically the guys that run these gold companies they don’t know about this. Why should they? They’re geologists, they’re mining engineers, it’s not part of their study.

Here in America educational system is highly controlled especially at the college level. Nobody gets ahead in economics talking the way I’m talking. The Huffington Post somebody did a study, and it turns out if you want to get ahead in the academy you have to publish. And it turns out that just about all the important economic journals are edited by a president or former employees of the Federal Reserve.

You don’t get ahead. So basically, there’s a lack of knowledge, and gold is denigrated and so those quotes that you gave from that Financial Times, imagine the Financial Times sponsoring, and I think that documentary, it’s called something like, “Dangerous Obsessions”… if you go on YouTube you can search those key words, dangerous obsession… it’s just outrageous that an expert should say it’s like pooh. This is really crazy, but that’s the level that we have now. When you start talking about gold people pigeon hold you. They say “You must be a gold bug” which is a derogatory statement.

Anyway, as far as the guys who run the mines are concerned they’re interested in salaries. They get good salaries. Like I say, very few of them have any skin in the game and that’s it. They don’t know the vocabulary, they don’t know what you’re talking about, they defer to the World Gold Council which is basically the world jewelry council. That’s been a thorn in my side the whole time I’m at this.

Mike Gleason: Yeah that’s I think the conclusion we’ve drawn as well. There’s no great explanation as to why these guys are just sort of completely AWOL when it comes to the suppression schemes. We have had (on our podcast) Keith Neumeyer CEO of First Majestic Silver who is a very outspoken individual when it comes to the manipulation. At least there are some out there that are doing that.

Well Larry, as we begin to close here tell folks how they can get involved or perhaps how they can partner with you in your efforts to help advance sound money policy, other than making a fully tax deductible donation to FAME… which can be done at FAME.org… talk about what people might do to join in the fight to help restore fiscal responsibility and sound money to our nations monetary policy.

Larry Parks: Well the first thing is they’re going to have to invest some of their most valuable resource and that’s their time to learn about this. We have on our website, especially the issues summary. It’s simple to do, there’s a lot of cognitive dissonance here. But we could use introductions, especially introductions to trustees of pension funds. And one of the big opportunities I think to get interest in gold we need to build a constituency for gold in the United States and there is no such constituency today. I think in December it’s a proxy for this, the mint sold something like three thousand gold eagles. That’s nothing. That’s like a tenth of a ton.

To put that into perspective for you, the mines produce about three thousand tons a year and there’s roughly two hundred thousand tons above ground. A tenth of a ton is nothing. You know because you’re in the business people keep denigrating gold. So really the opportunity to build a constituency is to get gold into pension funds.

I know you know about this Mike, I don’t know if your listeners know about it but we just had three bills that went down in flames in Wyoming. Which were going to compel the state of Wyoming… we had about seventeen representatives out of sixty vote in favor of it. But all of these pension funds are naked. And if these pension funds at least had some gold people would start taking an interest in what’s happened here. And what’s happened will not stand the light of day. Like I said this is just out and out thievery, stealing from ordinary people their future payments. It’s not like they come to your house and take what you have, but really we’re on a glide path to Venezuela as I’ve said.

We could use introductions. If the people can’t make a donation refer us to a trustee of a pension fund, any kind of pension fund. And I’m particularly interested in people who run pension funds for organized labor. The reason for that is that organized labor, they employ lobbyists and they have pull. They’re the principle victims so they’re the ones who could really make a difference here.

Mike Gleason: Well, it’s certainly been a great honor to speak with you and we greatly enjoyed the conversation. Keep up the great work. You guys are doing fantastic work there. People should go to FAME.org and make a contribution. You’ve just heard from Larry and how he has dedicated a lot of his life to this effort and it’s a very noble one. We certainly appreciate you coming on the Money Metals Podcast, take care Larry.

Larry Parks: A real pleasure, thank you Mike.

Mike Gleason: Well that will do it for this week, thanks again to Larry Parks of the Foundation of the Advancement of Monetary Education for more information visit the website FAME.org and please consider making a contribution to this important and vital cause. Again, you can do that and find out plenty of other information on these topics as well at FAME.org.

Market Death by Tariffs; Safe-Havens Reign Supreme

Risk aversion ran wild as stock markets and other risk assets plummeted on global tariff escalation.  The US dollar’s early gains during the end of May market rout is starting to reverse course on expectations the Fed may cut rates twice this year.  Stocks are licking their wounds following a double dose of negative trade news.  The first bullet came from China’s retaliatory measures that will deliver a crippling blow to multi-nationals and likely further downgrade earnings forecasts as the Sino-US relationship appears to going towards a path of irreparable damage.  The second bullet came from the escalation in trade tensions between Mexico and US, which  pretty much came out of nowhere.  The trade spat with China has been brewing, but markets were taken back with the US actions towards Mexico.  The US, Mexico and Canada were in the process of getting the USMCA approved with their respective governments, but that may have hit a road block now.  President Trump’s attack to their southern neighbor saw a Mexican response that US exports of grains, pork, and apples may be hit with tariffs.  Tariff escalation is detrimental to global growth and the bond market saw Bunds fall to a record low and the 10-year Treasury yield dropped to a fresh 20-month low and fell further below the Fed’s fund target range.

Markets will continue to care about every incremental trade update, but they should also closely pay attention to a couple important rate decisions and a wrath of Fed speak, which includes Chair Powell’s discussion on policy strategy.  On Monday, President Trump will also make a state visit to the UK, where he will meet with Queen Elizabeth and PM May. Tuesday, the RBA is expected to cut rates and we hear from Fed Chairman Jerome Powell at a Fed Research Conference. Wednesday, the EIA releases their crude oil weekly report and the Fed releases the Beige book and members Clarida and Bostic speak. On Thursday, the ECB will keep policy steady and update their economic forecasts. Friday will see PM May step down as the leader of the conservative party and have the release of the US employment report, which expects to see hiring deliver 185,000 new jobs in May.

  • RBA to cut rates and signal more are coming
  • ECB to downgrade forecasts and give details on next round of TLTROs
  • Fed’s Speakers to address recent trade war escalation and possible capitulation on cuts

RBA

On Tuesday, the Reserve Bank of Australia (RBA) is widely expected to cut the cash rate by 25 basis points to 1.25%, with investors focusing on how many more cuts will be queued up.  Only 5% of economists, two specifically, see the RBA keep rates steady.  At the last meeting, the RBA surprised many when they kept policy following disappointingly weak first-quarter inflation.

The RBA may decide on holding off on confirming any additional rate cuts, preferring to see how the global growth slowdown hits their domestic economy. The recent global bond rally took the Australian 10-year yield below the RBA’s cash rate of 1.5%, for the first time since 2015.  Analysts are piling on the rate cut bets, JP Morgan sees rates falling to 0.50% by mid-2020 while Westpac and Capital Economics see cuts targeting 0.75%.  With tame inflation, the RBA’s easing decision should be an easy one.

The Australian dollar remains near the lows of the year, as the recent escalation in trade wars dims global growth outlooks, and while data points in the Asia-Pacific continue to deteriorate.  With China’s May manufacturing PMI falling back into contraction, expectations remain high the PBOC will come to the rescue. While the market begins pricing in further RBA rate cuts, we could limited Australian dollar downside as the greater driver could be the Fed’s capitulation with delivering their own rate cuts.

Fed

A wrath of Federal Reserve members will speak next week, with investors waiting to see further confirming signals that the Fed will provide further accommodation shortly.  On Tuesday, Fed Chair Jerome Powell will discuss monetary policy strategy, tools, and communication practices at the Fed’s framework review conference in Chicago.  Markets have not heard from Powell since the trade war went on steroids and he could use this as his stage to begin capitulate and signal accommodation is needed.  The Fed’s preferred core price measure in April stayed steady at 1.6%, but still comfortably below the Fed’s 2% target.  The US trade war escalations with China and Mexico will likely dominate the Fed’s concerns here and while the data-dependent script may suggest they need to see further data confirm weakness, they might agree that is not necessary.

ECB

The ECB rate decision is expected to see no change with rates and possibly minor downgrades with their economic forecasts.  The central bank will also deliver more details on the expected launch of its third round of targeted long-term refinancing operations in September.  Economists are expecting them to use TLTROs as a backstop, which could provide insurance in times of heightened uncertainty.  With most of the other G7 central banks on the verge of providing stimulus, expectations are rising for the ECB to also provide fresh support to the ailing economy. Global trade wars are raising the risk for a euro zone recession, but that is still not the base case.  The current implied interest rate probabilities see a 53% chance that the ECB cuts rates at the January 23rd 2020 meeting.

The upcoming meeting should see the ECB provide a slight adjustment to forward guidance becoming more accommodative.  Economists however still are not abandoning a rate hike in the near future and that should provide some support for the euro.  A Reuters poll showed 47% of the 60 contributors expect a rate hike at some point between now and the end of 2020, while 3% saw a cut and the rest expect no change in rates.

The euro remains stuck in very tight range and we should see 1.11 remain formidable support, while 1.1250 provides initial resistance.

Oil

The month of May was a disaster for crude prices, the worst May performance in seven years, as unabrupt escalation with global trade war saw the global growth outlook crumble.  Oil prices have now given up the lion share of the effects of the OPEC + production cuts.  Geopolitical risks remain in place but right now demand growth is in freefall and oil remains vulnerable.  The US – China trade war remains most critical to the global growth outlook, but the addition of trade tensions between the US and Mexico raised the slower demand picture for the Americas.

West Texas Intermediate crude’s selloff is now around 20% lower from the April 23rd high of $66.60.  With rising expectations that OPEC will be less effective in signaling continued production cuts going forward, crude will need to rely on some positive outcomes on the trade front for prices to begin stabilizing.

Gold

It took a while, but gold prices finally broke out higher after the trade war escalation led to a code red for global growth.  A devastating month for equities, the worst one since December, and other risk assets saw a global bond rally lead the way for safe-haven assets.  The yellow metal is once again becoming an attractive safe-haven as markets will remain skeptical on any trade progress after seeing how fast we could see Trump deliver a new tariff threat.

Sunday, June 2nd
9:45pm ET           CNY Caixin Manufacturing PMI

Monday, June 3rd
2:30am ET           CHF CPI m/m
3:15am ET           EUR Spain Manufacturing PMI
3:45am ET           EUR Italy Manufacturing PMI
3:50am ET           EUR France Manufacturing PMI
3:55am ET           EUR Germany Manufacturing PMI
4:00am ET           EUR Eurozone Manufacturing PMI
4:30am ET           GBP Manufacturing PMI
10:00am ET         USD ISM Manufacturing PMI
10:00am ET         USD Construction Spending m/m
9:30pm ET           AUD Retail Sales m/m

Tuesday, June 4th
12:30am ET         AUD RBA Interest Rate Decision
3:00am ET           EUR Spain Unemployment m/m
4:30am ET           GBP Construction PMI
5:00am ET           EUR CPI Flash Estimate y/y
5:30am ET           ZAR GDP Annualized q/q
9:00am ET           MXN Consumer Confidence Index
10:00am ET         USD Factory Orders m/m
10:00am ET         USD Final Durable Goods Orders
9:30pm ET           AUD GDP q/q
9:45pm ET           CNY Caixin Services PMI

Wednesday, June 5th
4:30am ET           GBP Services PMI
5:00am ET           EUR Eurozone PPI m/m
5:00am ET           EUR Eurozone retail sales m/m
8:15am ET           USD ADP Employment Change
9:45am ET           USD Final Markit Services PMI
10:00am ET         USD ISM Non-Manufacturing Index
10:30am ET         DOE US Crude Oil Inventories
1:00pm ET           NZD QV House Prices y/y
9:30pm ET           AUD Trade Balance
9:30pm ET           AUD Building Approvals m/m

Thursday, June 6th
2:00am ET           EUR Germany Factory Orders m/m
7:45am ET           EUR ECB Interest Rate Decision
8:30am ET           USD Trade Balance
8:30am ET           USD Initial Jobless Claims
7:30pm ET           JPY Household Spending y/y

Friday, June 7th
2:00am ET           EUR Germany Industrial Production m/m
2:00am ET           EUR Germany Trade Balance
2:00am ET           NOK Norway Production data
2:45am ET           EUR Industrial Production m/m
3:30am ET           GBP Halifax House Prices m/m
8:30am ET           USD Non-Farm Payroll Report, Unemployment Rate and Wage Data
8:30am ET           CAD Employment Change and Unemployment Rate
9:00am ET           MXN CPI y/y

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

Euronext Updates on Oslo Bors Takeover, Reveals Unconditional Offer

Euronext completed its due diligence on acquisition of Norway’s stock exchange and announced an unconditional offer to acquire up to 100% of Oslo Bors VPS’s capital. Franco-Dutch exchange operator offered 158 Norwegian crowns per share for Oslo Bors, valuing it at around 6.8 billion Norwegian crowns ($779 million), the same price offred by rival bidder Nasdaq Inc.

Both exchanges won approval from Norway’s Ministry of Finance to buy up to 100% of the exchange earlier in mid-May, effectively extending a six-month battle takeover one of the last independent stock market operators in Europe.

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“As previously announced, in order to provide remaining Oslo Børs VPS shareholders an opportunity to tender their shares to Euronext on the same terms, Euronext today launches an unconditional offer at NOK 158 plus a fixed interest payment of NOK 3.21 per share for all issued and outstanding shares in Oslo Børs VPS not already owned by Euronext,” it said.

Euronext, which runs exchanges in Paris, Brussels, Amsterdam, Lisbon and Dublin said its unconditional offer will be open for acceptance until June 28, with shareholders accepting this proposal will receive settlement on June 14.

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Euronext Reaps Benefits of ISE Acquisition

Earlier in February, the U.S. exchange operator raised its offer to 158 Norwegian crowns plus a fixed interest payment of NOK 3.21 per share from 152 crowns.

Euronext has already secured the backing of investors holding 53.2 percent of the shares in Oslo Bors and said its offer is open for the shareholders who supported the Nasdaq bid.

It also reduced the minimum acceptance condition under the offer from more than 90 percent of shareholders to two-thirds, the percentage that Nasdaq had argued as a minimum for takeover to be completed in order to ensure that a buyer would have complete control.

Euronext reported last year strong revenue growth which was mainly owed to acquisition benefits of the Irish Stock Exchange which drove listing revenue at Europe’s largest exchange.

Top 5 Events: May Eurozone Inflation Report & EURJPY Price Forecast

Eurozone Inflation Report Talking Points:

  • The initial May Eurozone inflation report is due on Tuesday, June 4 at 09:00 GMT.
  • Soft inflation readings will underscore the necessity for the European Central Bank to take dovish policy actions at the June ECB rate decision.
  • Recent changes in retail trader positioning suggest that EURJPY could decline further in the days ahead.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

06/04 TUESDAY | 09:00 GMT | EUR Eurozone Consumer Price Index (MAY A)

The preliminary May Eurozone Consumer Price Index is due on Tuesday, just days before European Central Bank policymakers meet for their June policy meeting. According to Bloomberg News, the headline Eurozone inflation reading is due in at 1.3% from 1.7% (y/y), while the core reading is due in at 0.9% from 1.3% (y/y).

With inflation expectations falling precipitously in the past few weeks – since May 5, the 5y5y inflation swap forwards have declined by 10-bps from 1.404% to 1.291% – it’s seems highly likely that the May inflation report will not only be weak, but it will be used as the basis for more dovish policy action by the ECB at their June meeting.

Eurozone Inflation Expectations Have Plunged Despite Brent Oil Holding Steady

eurozone inflation expectations, ez 5y5y inflation swap forwards, ez inflation expectations, brent oil technical analysis, brent oil inflation

Pairs to Watch: EURGBP, EURJPY, EURUSD

EURJPY Technical Analysis: Daily Price Chart January 2018 to May 2019) (Chart 2)

eurjpy price forecast, eurjpy technical analysis, eurjpy price chart, eurjpy chart, eurjpy price

The bearish breakout from the symmetrical triangle continues to drive EURJPY prices lower. Price has closed below the daily 21-EMA every session since April 23, and the drop to fresh yearly lows at the end of May portends to more weakness at the start of June.

From a momentum basis, there is no reason to be bullish. EURJPY price is below the daily 8-, 13-, and 21-EMA envelope. Meanwhile, both daily MACD and Slow Stochastics continue to trend lower in bearish territory; the latter of which has sustained an oversold condition, typically a sign of strong bearish momentum. The rising trendline from the 2012 and 2016 swing lows is now in focus near 120.50.

IG Client Sentiment Index: EURJPY (May 31, 2019) (Chart 3)

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EURJPY: Retail trader data shows 71.8% of traders are net-long with the ratio of traders long to short at 2.55 to 1. In fact, traders have remained net-long since Apr 25 when EURJPY traded near 125.814; price has moved 3.8% lower since then. The number of traders net-long is 2.4% lower than yesterday and 2.9% lower from last week, while the number of traders net-short is 33.8% lower than yesterday and 27.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURJPY-bearish contrarian trading bias.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

Forex Volatility Could Spike Further as Global Risks Linger

CURRENCY VOLATILITY – TALKING POINTS

  • USD/JPY, AUD/USD, EUR/CAD 1-week implied volatility measures skyrocket
  • A barrage of economic data releases looks dictate global risk appetite next week
  • Swelling downside risks to global economic growth threatens to deteriorate market sentiment further
  • Learn how to take advantage of market-moving events with this free educational guide on Forex News Trading

Currency market volatility appears set to continue creeping higher as forex traders digest the latest jolt of uncertainty from Trump Tariffs on Mexico and global growth risks lurking on the horizon. A slew of economic indicators and events scheduled next week will likely provide traders with a health check on the global economy which should determine risk appetite and price action across forex, commodity and capital markets.

USD/JPY, AUD/USD, EUR/CAD VOLATILITY AND TRADING RANGES (OPTIONS IMPLIED)

US Dollar, Japanese Yen, Euro, Australian Dollar, Canadian Dollar Trading Range and Volatility

USD/JPY, AUD/USD and EUR/CAD may be of particular interest to keep an eye on next week considering the central bank rate decisions, several PMI data prints and employment numbers that loom. In fact, implied volatility measures for the currency pairs listed above have soared to multi-week highs as forex options traders gear up for next week’s chalk-full economic calendar.

FOREX ECONOMIC CALENDAR – USD/JPY, AUD/USD, EUR/CAD

Forex Economic Calendar USD, CAD, AUD, EURAUDUSD, EURCAD, USDJPY forex event risk

Although not pictured above, manufacturing indicators from Australia and China could easily set the tone for sentiment next week which are due for release 22:30 GMT Sunday and 1:45 GMT Monday, respectively. The escalation in US China trade tension appears to have already weighed negatively on the Chinese economy after its state-run economic agency reported a contraction in its manufacturing industry on May 31.

The market’s preferred private-sector reading from Markit economics this coming Monday looks to echo the Chinese manufacturing downturn which could provide another blow to risk assets if the data is materially worse than what was initially reported by China. Weakening economic activity in China will likely spill over to neighboring Australia seeing that the country is heavily dependent on import demand from China (who comprises roughly 30 percent of Aussie exports). As such, the Australian Dollar could be at risk of reversing lower early next week in response to these PMI data points while the anti-risk driven Japanese Yen may continue its recent ascent.

AUD/USD PRICE CHART: DAILY TIME FRAME (DECEMBER 17, 2018 TO MAY 31, 2019)

AUDUSD Price Chart Ahead of GDP, RBA and PMI

Aussie price action will be primarily dictated by the Reserve Bank of Australia’s (RBA) interest rate decision, however, which is scheduled for release Tuesday at 4:30 GMT. Overnight swaps are now pricing a 95.3 percent probability that the RBA lowers its policy interest rate. The near-certain rate cut bets compares to a 23.8 percent probability priced in earlier this month.

If an RBA rate cut materializes next week, AUD/USD will likely test technical support at the 76.4 percent Fibonacci retracement level and the lower bound of the 1-standard deviation option implied trading range. Moreover, the Australian Dollar could oscillate further in response to Q1 GDP data due Wednesday at 1:30 GMT. An upbeat report has potential to provide a bit of buoyance to AUD crosses whereas a bleak GDP report could exacerbate Aussie weakness and reiterate the bearish downtrend in AUD/USD.

USD/JPY PRICE CHART: DAILY TIME FRAME (DECEMBER 18, 2018 TO MAY 31, 2019)

USDJPY Price Chart

As mentioned previously, the sentiment-driven Japanese Yen could continue to gain ground against its counterparts if appetite for risk fails to recover next week. USD/JPY has swooned over the last month with currency traders fleeing risk and racing to unwind JPY-funded carry trades, spurring demand for the Yen in turn. If the upcoming US manufacturing and services PMI data disappoints, calls for the Fed to cut rates this year will likely grow louder which would hinder US Dollar upside.

Additionally, from Fed Chair Jerome Powell on Wednesday looks to move the tape in stocks and the USD with the head central banker providing updated commentary on the FOMC’s view on easing monetary policy. Rate traders are already pricing over a 90 percent probability that the Fed slashes rates by 25 bps by the end of the year according to overnight swaps. Although, Friday’s employment data could reverberate a robust labor market which has served as the cornerstone of strength in the US economy and could boost the greenback.

USD/JPY bulls will likely aim to cling onto support near the 50 percent Fibonacci retracement line drawn from the year-to-date high and low next week. Rebounding market sentiment could push the currency pair bouncing back towards resistance posed by the 38.2 percent Fib, but USD/JPY bears may overwhelm potential upside if risk trends continue to escalate which could set the 108.00 handle in traders’ crosshairs.

EUR/CAD PRICE CHART: DAILY TIME FRAME (DECEMBER 19, 2018 TO MAY 31, 2019)

EURCAD Price Chart before ECB

In the aftermath of the EU Parliamentary elections and the Bank of Canada (BoC) rate decisionthis past week, EUR/CAD traders shift focus to upcoming Canadian PMI and employment numbers in addition to Eurozone inflation data and the ECB meeting. Overarching weakness in the Euro and Canadian Dollar has positioned EUR/CAD in a relatively tight trading range since mid-January.

Yet, a symmetrical triangle appears to have emerged from a series of lower highs and higher lows and could keep EUR/CAD rangebound over the short-term. Nevertheless, the threat of increased dovishness from the ECB next week could drag EUR/CAD lower. That being said, recent crude oil price carnage has served as a major headwind to the loonie which may linger amid deteriorating global growth prospects.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

The Tell: Trade wars have cost U.S. stock market $5 trillion so far, esti…









The U.S. stock market has left $5 trillion on the table as trade tensions over the past 17 months contributed to an effectively sideways trade, Deutsche Bank estimated on Friday.

“While other factors also arguably played a role, the trade war has been key in preventing a recovery in global growth and keeping U.S. equities range bound. Foregone U.S. equity returns from price appreciation for 17 months are worth $5 trillion,” wrote Binky Chadha, the bank’s chief strategist, in a Friday note, based on an price appreciation at an annual rate 12.5% (see chart below).
















Deutsche Bank


Chadha’s calculation is based on the capitalization of the Russell 3000












RUA, -1.28%










a broad measure of equity markets, which had a capitalization of $28.7 trillion at the start of 2018. Foregone returns for the index over 17 months comes out to $5 trillion.

The S&P 500












SPX, -1.32%










  in the first four months of 2019 bounced back sharply from a steep fourth-quarter selloff nudging to an all-time closing high in April. But the index has retreated more than 6% in May, leaving it on track for its first monthly decline since December and its worst May performance since 2010. The Dow Jones Industrial Average












DJIA, -1.41%










which failed to return to record territory before the May swoon, is also off more than 6% for the month.

Read: Stock market on track for ‘key’ monthly reversal that ‘presages deeper declines,’ technician says

The May retreat has been blamed by analysts in large part on an escalation in the U.S.-China trade fight that shows little likelihood of near-term resolution. The battle between the world’s two largest economies has contributed to jitters over the global and U.S. economic growth outlook. Those worries were amplified after President Donald Trump late Thursday announced he would place escalating tariffs on all Mexican imports in an attempt to pressure the country to stem the flow of migrants to the U.S. southern border.

See: President Trump’s top trade official opposed tariffs threat on Mexico

Chadha said the toll is comparable to the impact of the European financial crisis in 2011-12, which was also around the time of the U.S. debt downgrade, as well as to the dollar-and-oil shocks that accompanied the collapse of crude prices in 2014-2016.

“In terms of duration, the current episode is still 5-6 months short of those two episodes. But it is notable that the current episode has occurred in a context of significantly stronger U.S. macro and earnings growth and a lower unemployment rate,” Chadha said.

The foregone returns are already equal to 12 years of the U.S.’s bilateral trade deficit with China, he also noted.

“While we subscribe to the consensus view that U.S. trade deficits reflect macro and not micro factors and trade policy initiatives are unlikely to have any impact on them, the point is that even if one did take the opposite view that the bilateral trade deficits are bad and that trade policy would fix them, the cost in terms of foregone equity returns is already worth 12 years of that bilateral merchandise deficit,” Chadha wrote.























William Watts is MarketWatch’s deputy markets editor, based in New York. Follow him on Twitter @wlwatts.


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Coinbase President Asiff Hirji Parts Ways, Michael Li Elevated to COO

The president and chief operating officer at Coinbase, Asiff Hirji, is parting ways with the No. 1 US cryptocurrency exchange after providing services to the firm for 18 months. Michael Li, a former data executive at LinkedIn that joined Coinbase in March 2018 replaces Hirji in the COO role, the company announced today.

While not attesting that his departure is tied to a change of direction in the company, Brian Armstrong, co-founder and CEO of Coinbase said: “We’re incredibly grateful for Asiff’s contributions over the past 18 months. His experience and mentorship helped guide Coinbase through an important chapter in its history. He joined at a critical time when both the company and crypto space were going through rapid growth, bringing his extensive experience to bear when it was most necessary.”

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Hirji, a tech industry veteran, joined Coinbase in December 2017, replacing co-founder Fred Ehrsam, who served as president of the company until January. Hirji joined from the VC firm and Coinbase investor Andreessen Horowitz, where he was a partner. He also spent time in executive roles at Hewlett-Packard, Saxo Bank and stock trading platform TD Ameritrade.

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The newly-appointed Emilie Choi has been hired in March 2018 as the new president of Corporate and Business Development to spearhead Coinbase’s acquisition initiatives. Emilie joined the crypto unicorn after working for more than eight years at LinkedIn, where she served as LinkedIn’s Vice President of Corporate Development.

Asiff’s exit follows the recent departure from Coinbase of Timothy Plakas, who was running Coinbase’s OTC trading desk. Adam White, the fifth employee of Coinbase, joining the firm in 2013, also departed in October and instead landed at ICE-backed cryptocurrency exchange, Bakkt.

Coinbase’s policy officer, Michael Lempres, also resigned in October from his newly-created role and parted ways with the company after two years.