Precious Metal Weekly – Buy The Dips

Deal or No Deal – that is the question. It has been a rather fascinating yet frustrating week as traders and investors are thrown into the roller coaster of news. First they have to deal with broken correlation in the Bunds and Euro. Second, the widespread rumours of a looming deal that spiked the market higher to then come back down to where it opened. As you can imagine, it is a hair pulling exercise that many has to experience. Bad news is that we have another week to go.

A dovish remark from Miss Yellen in the recent FOMC press conference has taken the dollar bull by shock. The key takeaway from the press conference is full steams ahead and we will raise rate this year no matter what (but not knowing when). Impulse dollar long was piling in before the announcement and it does look a tad odd that USDJPY continue higher like there is no tomorrow. When the announcement was clear, the rush to the exit door was pretty nasty and dollar bulls took a big hit again. One would think that there has been a change in the air, given recent positive economic data did not help to initiate a higher rally. The lure of a rate hike seems to sustain current price action and we have to reiterate once again that a correction is in process – thus lower dollar index is expected in the near future.

Early next week, we kick off with Euro Group Summit and Meetings followed by US existing home sales data. Tuesday we have Chinese and Eurozone Flash Manufacturing PMI data then FOMC member Powell speaks. Highlight of the week is the US Final GDP Q/Q followed by Thursday host of unemployment claims, personal spending and income. The week will be a very dollar oriented one, which could make or break the current dollar strength. A stream of positive data may alleviate the dollar higher but will it be sustainable?

Grexit scenario added an extra element of uncertainty but should deal arrive, the dollar rally could well subside as traders look elsewhere for better yield.

Nothing moves in a straight line and with 3rd consecutive weekly close of lower low, the dollar index look set for a retracement of some sort. Mark that we have host of economic data next week that could help support the dollar for another week.

In the medium to long term, we envisage a weaker dollar index as the last Federal press conference rings a clear dovish remark and additional (not necessarily) helpful comments from other FOMC members may have solidify that Yellen wants a weaker dollar for now.

However, we will remind readers once again nothing moves in a straight line and should not be surprised to see a bounce as dollar range trade in the symmetrical triangle pattern. With that in mind, several scenarios may well happen:

– Commodities to take a back seat and look to build strong support zone
– Stocks sell off and this could be the catalyst for further selling
– Bear in mind that dollar index is very much Data dependant and Greek Deal or No Deal
– As Greece goes down to the wire, safe haven buy to the dollar may continue next week
– Once deal is done, the corrective rally in the dollar is done with a potential upside capped by the 20 WMA
– Looking further, an AB = CD pattern will play out (assuming the 20 WMA did act as resistance followed by a rather major sell off in the dollar index

So look for the rally and wait patiently to open a short position as we approach the end of next week.

Key price to watch are – 20 WMA / 95.32 and 93.13

Gold Technical Outlook

Weekly chart has posted a rather bullish setup on gold. Here are a few reasons why we are semi-bullish:

  • Since March low, we have had a higher high and higher low
  • The market tried to find sellers to drive prices lower but failed several times (bargain hunters)
  • Note how the vicious selling stops at 1142.59 but have recovered since
  • The Bear looks ready to give up and short covering could be in the cards (potential target of 1250 – 1268 levels)
  • Once Grexit has been resolved, we expect USD interest start to wane
  • We are entering seasonal trend in gold where we see a short term rally
  • This week close is above 20 WMA (which sits are 1196) but may consolidate next week between 1179 and 1206 levels
  • Bollinger Band is converging and more often than not, prices will range trade until a breakout (possibly in the next 2 weeks)
  • Key resistance level next week is 1205.70 and support level at 1189, 1184 and 1179
  • Pullback is a buying opportunity and a Swing Long opportunity

(Check out our Dollar index analysis which comes in line with our argument)

Trade: Pullback is a swing long opportunity. Potential breakout level is between 1215 -1222 which could take us to 1267 levels!
Position Valid Date Price Action Stop Loss Target Results
LONG 15th – 19th June 1193 Closed 1185 1203 +10
SHORT 15th – 19th June 1173 Closed 1181 1164 -8
LONG 21st – 26th June 1175 – 1185 Order Placed 1150 1232
LONG 21st – 26th June 1185 – 1194 Order Placed 1150 1260
20 WMA 50 WMA 100 WMA
1196 1222 1261

Silver Technical Outlook

Weekly Chart

Silver failed to close above the 20 WMA at 16.43 and that will act as resistance. Only a clean break and close above will give the white metal a bullish momentum to possibly test the 50 WMA which currently sits at 17.25.

Previous cumulative red candles for 4 weeks in a row (end of March 2015 to April) has actually transpired into a similar situation where the following green candle failed to close above the 20 WMA but then followed by 2 green candles that eventually breaks above the 20 WMA and hit resistance at 50 WMA.

The weekly RSI may have found support and could bounce higher here before taking a dive lower. This fits in with out thesis that Precious Metals need to rally before a monumental crash.

Trade: Pullback is still a buy. Valid for this week only.
Position Valid Date Price Action Stop Loss Target Results
LONG 25th – 29th May 16.60-16.80 Closed 16.00 17.50 (17.80) -0.70
LONG 08th – 12th June 15.70-15.90 Live 15.30 (15.50) 17.20
20 WMA 50 WMA 100 WMA
16.43 17.25 18.96

Platinum Technical Outlook

Weekly Chart

Weekly RSI may have bottomed and this offers a great swing long opportunity with a great RR. The last weekly candle has pierced below the Bollinger band and this could mark a possible reversal if platinum close next week with a doji within the body of the previous candlestick.

With a risk of 10 -20 points, the reward that we are after is at least 60 points (1:3) ratio. Here are some of the reasons to go long:

– Platinum is oversold after the FOMC statement that had a revision lower on US GDP

– Dollar weakness has not transpired into any buying but that is about to change

– A 20 WMA reconnect could be the play for a corrective rally

– 4 hour RSI bullish divergence thus a corrective rally is overdue

Trade: Notice we have raised our Short position stop to break even as we prepare to buy pullback and swing long. Valid for this week only.
Position Valid Date Price Action Stop Loss Target Results
SHORT 15th – 19th June 1085 Live 1085

(1100)

1030
LONG 22nd – 26th June 1075 – 1085 Order Placed 1060 1140
20 WMA 50 WMA 100 WMA
1144 1243 1339

Palladium Technical Outlook

Weekly Chart

We took the risk to go long as there were several key support zones but price action sliced through and broke lower. Even the 200 WMA did not act as a strong support and the flush came hard on Palladium. This has certainly damage the chart and the weekly MAs could soon roll over lower (20 WMA already crossed below 100 WMA and 50 WMA could follow suit – potentially create a death cross). In the short term, Palladium could find support at 690 levels and a corrective bounce may relieve some of the selling pressure. However, the medium term outlook is to sell into the corrective rally.

Trade: Long got stopped out.
Position Valid Date Price Action Stop Loss Target Results
LONG 08th – 12th June 735-740 Closed 715 (727) 770 -20
LONG 22nd – 26th June 690 – 700 Order Placed 680 750
20 WMA 50 WMA 100 WMA
773 798 777

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

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