Metals Rise Strongly to New Highs; Fed’s Powell Has No Surprises; USD/JPY Retests 34-Year High at ¥152; Crude Oil, Gasoline Futures Break Higher; Eyes on Cocoa Futures After Spectacular Gains; Swiss CPI Unchanged.
- A few hours ago, spot Gold again rallied to a new all-time high above $2,300. Gold tends to be positively correlated with risk assets, many of which have been enjoying rallies to new highs in recent days. Trend traders will want to be long here. Other precious metals have also been seeing gains, with Silver rising strongly to a new 2-year high price. Some non-precious metals such as Copper are also breaking to new long-term highs.
- In the Forex market, the US Dollar Index was held at key resistance earlier this week, and has been sold since then, suggesting the Dollar has peaked for the time being, and giving a technical boost to all trades against the Dollar, many of which especially in commodities we can see performing well. It may be wise to trade against the greenback over the rest of this week, unless there is some surprising data released. Since today’s Tokyo open, the strongest major currency has been the New Zealand Dollar, and the weakest major currency has been the Swiss Franc. The Swiss Franc is weak because Swiss CPI data just released earlier today was unexpectedly low, with no month-on-month change at all when an increase of 0.3% was expected.
- In public remarks, US Fed Chair Powell stated that policymakers will wait for clearer signs of lower inflation before cutting interest rates, which is nothing new and no surprise to anyone.
- The Japanese Yen continues to be weak, keeping the USD/JPY currency pair near the record high it made very recently just below ¥152. Japanese financial officials will likely threaten intervention if ¥152 is tested again, but it seems likely that the price won’t fall very far in the meantime, giving traders potential opportunities to trade that range. Trend traders will still be interested on being long of the USD/JPY and in being short of the Japanese Yen in general. Analysts speculate that intervention by the Bank of Japan, if it comes, will likely drive the price down temporarily to about ¥147 / ¥147.50.
- Crude Oil is looking bullish, with both WTI and Brent hitting new 5-month high prices yesterday. Gasoline futures reached a new 18-month high yesterday.
- The minor commodity Cocoa continues to look very bullish over the long term, although the short-term price action is suggesting a deeper bearish retracement. The commodity superfood has almost tripled in value over the last year alone, with many analysts suggesting supply side shortages are at least partly to blame for the meteoric rise. There is more and more demand for Cocoa every year as it is coveted as a key ingredient for chocolate but also as a superfood in its own right. Trend traders will be interested on the long side, although which such high volatility and sharp gains, it could come crashing down at any time, so trend traders must be careful to use a disciplined stop loss if going long. As well as Cocoa futures, there are Cocoa ETNs available which may be more suitable for retail traders and investors.
- Yesterday’s releases of:
- The ADP Non-Farm Employment Claims Forecast – came in stronger than expected, suggesting a more buoyant US economy.
- US ISM Services PMI – came in weaker than expected, suggesting the US services sector is facing declining demand.
- There will be a release today of US Unemployment Claims data.
