The Week Ahead: Gold Hits Fresh All-Time High

Okay, very good morning. It is Monday, 27th of July. Hope you had a fantastic weekend, and we pretty much start proceedings for this week as we left off last week with a number of assets. Gold has hit a fresh all-time high overnight. The euro is now trading the futures above the 1.17 handle. And sterling continues to benefit as well on the back of the weaker dollar, with the DXY now having tested that key 95 level last week, is now down below the 94 handle. So a couple of recurring themes here. We're also going to talk about the COVID global situation. Earnings season really steps up a few notches this week in terms of the number of companies reporting. A number of large tech mega-cap names coming on Thursday after market to look out for. We've also got the FOMC as well happening this week. So before I begin, don't forget to like and subscribe to the channel. We just released a new video over the weekend about algorithmic trading as well, but I'll be doing my daily briefings every day, of course. So feel free to subscribe to the channel. But look, let's get straight into things and have a look at the overall assessment of the market sentiment at the European Open today. And as I said, Gold. I want to start on the precious metals because overnight we've seen a further extension, and it's just been such an awesome rally we've had in some of these precious metals over the last week. If you actually look back to where we were just 10 days ago on the 17th, we were trading sub the 1800 handle, and here we are. If I put this on a monthly continuation, you can see we've now breached that all-time high, and I've still got these markups here from some of our discussions from last week with a few of those banknotes, particularly the one out of Citi where they were talking about gold and silver. And I just thought it helped to add a bit of context. This is what some of these big banks are looking for. But as you can see, we've, we've gone through that peak of the 2011 high now. Briefly in the overnight session, we printed at $1938. That's $18 above the previous high. So be very interesting to watch how this plays out, particularly when the US come in later and we get the COMEX open. If we can consolidate and the close today above that level, well then, you know, moving up to 1950 and then inevitably the 2000 mark could definitely well be on the cards. But just looking how quick this rally has been, on the flip side though, just wanted to talk about a few technical kind of points of interest. I mean, that previous high, just to go over again, was about 1920. So if I just mark up on a horizontal line where roughly that would be, kind of explains to a certain degree then that acceleration of the price movement you can see here in the overnight session. You can see here that extension on that green wick, which was on the daily pivots coinciding with around that R2, and we just exploded higher very quickly in, in fairly illiquid conditions in the overnight Asia-Pacific session. And we can see there we ran up by nearly $20 on that move alone in a fairly short time frame. So technically, that'll be a key area on any pullbacks, uh, if in fact that does happen today or any following days thereafter, will be the previous high. And on today that R2 level. Any further down, they're coming back down to 1904, then obviously the psychological 1900 handle as well. You can see how the price, uh, did react to that towards the latter part of Friday's trade, which was as well corresponding with this R1 in the daily pivots on that trading session. So 1900 would be key as well on any pullback. Similarly, silver markets have broken out of some of the near-term range that was restricting price action during the latter part of last week. You can see we got up and we really started testing it as trade got underway in the Asia-Pacific session, and then we just blew through that, coinciding with the timing, the trigger point, I'm assuming here, having not been awake overnight and watching markets, but gold likely trigger on that move that we just discussed and just firing silver up to make some further extension of the gains that that's been seeing as well of late. And if we look at that on a much bigger time horizon. This is looking on a weekly candlesticks, and you can see technically, um, a couple of key targets here. We're within less than a dollar now, sight of the $25 handle. That would be the first nearest and clearest kind of target here. That would put us up at that, um, summer 2013 high. Then you've got quite an area of resistance seen up at $26, which would be those support points in 2011-2012 to keep an eye on. for the week ahead. So definitely in the precious metal space, both gold and silver continue to remain to the upside at the moment. And depending on the daily close today, be interested to see whether gold can really start to push on now even further onto the upside. But just be aware of some of those key levels on any pullback if that does see some short-term profit taking on some of the extension of these moves. Otherwise, elsewhere, you can see notably in the two top left-hand corner charts The euro continues to remain really firm, as does sterling, largely benefiting from the weaker dollar. As I said, the DXY this morning is already down about 0.5%, so it's been hit in the overnight session. An extension through then the selling that was seen last week just comes in the context of this general positive euro fundamental view at the moment that people are are talking about. And let's just have a quick look at the euro currency on a technical perspective. We're going to talk about the euro as well a little bit more detail in a moment. This is the broader 1-week candlestick picture, and this obviously is the same chart we've been looking at as a reference point for, for a number of weeks now. And, you know, absolutely fair play for Alex for getting that call on the euro, absolutely spot on, and you know, he's always said that he remains bullish to the $118 handle, and definitely that coming to fruition so far, you know, having broken out of that trend line, those previous kind of 12, 18-month areas of resistance, and the key one obviously being $116 from last week. You can see here was a, was a real area of resistance in 2016, support in 2017, resistance late 2018, and now we've gone through there, just seen a further acceleration of these gains. And look, technically here not a great deal now of barriers above. Then looking for at least a challenge of 118 at some point, whether that happens today or in the coming days, be something to be mindful of, all things remaining equal. Because generally in context, we got the Federal Reserve meeting happening later on in this week, and, you know, just given the state of the COVID developments, you're probably going to get a more dovish-sounding Fed, and that's only going to help the narrative then of the continuation of the weakness in the greenback. To the benefit then of the euro and sterling currency pairs. So the euro is still remaining quite elevated at the moment. And, you know, on that front, let me just quickly jump over to something here, and that is looking at Europe's economy to outpace the US in upending of past roles. So this is really an extension of a lot of that argument we were talking about last week, uh, that's been explaining this movement that we've been having in the global currency market. There's a couple of banks that have come out with research notes over the weekend. JP Morgan, they basically said that Europe will do better because it has broken the chain that links mobility and the virus. Goldman Sachs have said their economists expect a steeper and smoother rebound from the corona crisis in Europe than in the US due to better virus control and a much smaller increase in unemployment rates. And then Deutsche Bank just as a target, how far can the euro rally? And their chief global currency strategist saying 120 is the target that they're looking for. And actually, if we just quickly go back to that longer-term time frame, where would— what would 120 look like? Well, you know, 120 is all the way up to this sort of level here if we're looking at the currency, and that would take us up to these peaks going back to May of 2018, uh, 1.1893. Here you can see that circle, the commencement of that trend line would be obviously a huge area as well as that 1.18 on the continuation of this move. But certainly a lot of people still remaining particularly bullish at this point in time and perhaps looking at it in a slightly different basis. And the reason why people are talking about, you know, the euro is the new kind of currency and area geographically of choice because the equity market in eurozone has also been outperforming And this is looking at, you know, the kind of tale of two currencies. And this is looking on a trade-weighted basis, so weighted average of exchange rates of home versus foreign currencies with the weight for each foreign currency equal to its share in trade. And as you can see here, the purple line is US Dollar Index and the orange line is the Euro trade-weighted index. And just looking at this here, you can see the switch that they've made of late. And those patterns now, they continue to, uh, move further away. And at this point in time, that's just been to the benefit of the euro currency. There's further divergence between these two, has been the first time, as you can see here, that they've not been entwined since going back to really 2017, you know. And you can look at just the beginning of the year, how far apart that we were compared to how much things have changed in just the course of last 6 months or so. Um, all right, well, quickly jumping into a couple of different things. I'm going to talk about, um, the coronavirus globally, then I want to wrap in the earnings, talk a little bit about the FOMC as well. But before I do, don't forget, um, on my Twitter account, my handle's here, my pinned post is my macro menu that I issue every Sunday. A couple of general talking points about the major themes for the week. So hopefully it's a good fundamental kind of crib sheet to get you ready. It's only a 3-minute read, so hopefully it's quite effective for you just when you're thinking about the markets, setting up your trading strategies on a Sunday night. It can be a go-to place for your calendar of events. So moving on then, let's have a look at this COVID-19 situation. And I thought I would start with taking a look at the global picture There's been a few things that people have been looking at, um, starting on the, on the Chinese front. China reported its most domestic cases since mid-March amid flare-ups in the west and northeast of the country. Um, and well, let me just add China on here just to give it a bit more context as well, because a few countries here that I've picked I just wanted to, to talk about. This is looking at a 7-day rolling average of new cases per million. One thing to do note overnight in Asia though, profits of China's industrial firms rose for a second straight month and at the fastest pace in over a year. It came in at 11.5%, and that was actually almost double consensus estimates. So despite them still monitoring these isolated kind of outbreaks in parts of the region Generally speaking, their economic data has been relatively robust in a sense of a post kind of the initial phase dip and stabilization of data that we've had in China. Elsewhere though in the region, Hong Kong will ban all dine-in services at restaurants after more than 100 local cases were registered for 5 consecutive days. India's now growing at the fastest in the world in terms of cases increasing 20% over the last week. And you can see that blue line here in India at the moment. And then the other country, of course, people looking at is Spain. Spain, you can see, has seen quite an aggressive increase here, and that did lead at the weekend to the UK's decision on Saturday to order a 2-week quarantine for travelers from Spain Spain following a spike in infections in 3 Spanish regions, and that's been met with strong response from Spain. Britain's particularly important for the tourist industry in Spain. British sunseekers account for about 20% of all of Spain's overall visitors, and this is going to put them off massively. It's also going to hamper the tourism industry on both sides of the country for So yeah, definitely this— the COVID situation requires some degree of vigilance. I know that I talked to a couple of people over the weekend, still quite a lot of emphasis on America, but also in Eastern Europe a few people were talking about just in terms of quite rapid growth in rates. And talking about the US situation and why the market, when we were looking at these charts, has remained relatively calm. I mean, this does underline some of the support for these precious metals amongst other things, but the equity markets this morning are actually slight positive. The reason why the market's not panicking yet over this COVID situation is, you know, if we start looking at the American situation, if anything, this was, you know, the American states, the Sunbelt states, if you think about 3 to 4 weeks ago, this was the real sweet spot of market sensitivity. And this was when these rates were really at their most steep in terms of the, uh, reacceleration of some of this kind of second phase growth. And a number of these areas, so Florida, uh, Arizona, Texas, California have actually started to stabilize. If anything, in the case of Arizona and Texas, started to decline from those recent peaks. And so at the moment, All of this continues to remain somewhat within that reference kind of view of where people anticipate the developments of COVID on a US basis and global level at this present point in time. Um, so it hasn't really rocked the markets, um, and does require monitoring, but unless we start to see something more aggressive start to pick up, particularly in America I would say I still remain fairly comfortable with holding the view that despite some of the sell-off that we had last week in US equities, which I think was a combination of multiple different things— I, a little bit of profit-taking on this massive run-up we've had, particularly in the likes of the tech and the NASDAQ, epitomized by companies like Amazon rallying 8%, you know, these are kind of telltale signs that the market's getting a little bit overstretched on that kind of momentum perhaps a little bit of FOMO. Inevitably the market comes off. Then you've had the increase in the US-China kind of tensions with the consulate situation last week. But I still think there's a decent floor under price when we— if we pull, pull back, which kind of leads us to where we are at the moment. And on that point, we do have the FOMC this week, and just going to jump over to that. And a few things to talk about this. I think we'll what will continue to be somewhat of a weighing factor on the US dollar, dollar, but also underlying a little bit of support perhaps then to prevent any further sell-off in US equities, is the fact that, look, the last time the Fed met was in June. And if you think about the context of where COVID-19 was nationally in America in June, the daily count of new coronavirus cases had stabilized. States like New York and New Jersey were logging declines at that point in time, and it was before some of the spikes that we saw in the likes of Texas, Florida, and California. So the world was quite a different place as far as COVID-19 was concerned the last time the Fed met. Long story short, things have got considerably worse since that point in time, and that is going to impede then the speed and shape of the recovery in North America. And consequently then, um, the Fed are going to have to remain in kind of ultra-accommodative mode, at least for the time being. Um, so some would say then that for the Fed, definitely will be monitoring this closely. But the real balance, I guess, comes from a few different things. The actual economic reality is going to be put right into the spot spotlight this week because we get the first reading of the advanced Q2 GDP reading. The consensus estimate is for that to be a -34% reading. Now, before you get too blown away by the dramatic headlines you're likely to read in the tabloids, um, even though that is a historic number, I don't think it's going to have too much in the way of implications of how markets are going to react later on this week when that data comes out. I think Thursday because it's been largely priced in. But it's more about— if anything, I'm interested about what does the Fed say about where their heads are at and what they think about the current situation and their forward-looking guidance. And not only that, the other key thing that everyone's watching at the moment, and perhaps is even more important, is what's happening on Capitol Hill with the expiration of some of these kind of stimulus programs that have been put into place in order to offset then, um, the large-scale unemployment and trying to keep confidence up in consumers and so on. So a few things on that point. Got a couple of notes here from articles over the weekend, starting off with the Business Insider. They reported that Republicans are proposing scaling back that $600 weekly federal boost to state unemployment benefits that Congress approved in March to an estimated $200 $200. So lowering from $600 to $200. The enhanced jobless benefits, they've been received by approximately around 20 million Americans. So just adding a bit of context, and they're going to expire on Friday, which is the 31st of this month. And this comes alongside the end of the federal eviction moratorium, putting some 12 million renters also at the risk of eviction at the end of this week if they don't start to sort something out sooner or later. Now, on that point, there has been a little bit of movement in press this morning, uh, in the overnight kind of session, which would have been late Sunday in the US. The Treasury Secretary Steve Mnuchin has said that a new COVID-19 relief package will be introduced on Monday, and he wants to act quickly. The White House Chief of Staff Meadows said the White House and Senate Republicans have reached a deal in principle on a new COVID-19 relief package legislative proposal likely to be unveiled today, but a handful of issues still need to be resolved. And then someone that the markets were quite responsive to and are watching quite closely is US Senate Majority Leader McConnell said that hopefully we can come together behind some package we can agree on in the next few weeks. Some are still mulling a temporary extension of the existing unemployment benefits to give Congress time to negotiate. And so, you know, such is the nature of these things, probably necessity rules. And at the point then, that risk is, you know, 20 million Americans, Americans who've been really just living on the breadline, uh, and helped by these enhanced jobless benefits. If they're to expire with some of these other programs as well at the end of this week. That's going to have massive implications then for the economic recovery in America. So expect the Fed and Powell to be putting a lot of pressure on fiscal support to help the economic recovery, but also equally that politicians, as we get towards the end of the week, will probably start to cut some deal, whether that's a rollover, short-term resolution, or something more meaningful in terms of the next latest large trillion-dollar-plus package coming out of the White House. Something probably will happen, but between now and then, things could get— could deteriorate in these negotiations before they then improve towards the end of the week. So something to just bear in mind, but that will be quite key for this week for sure. Um, just going back then to the calendar And then I'm going to have a look at some of the charts and earnings. For today, there's a few things looking out for. We've got the German IFO number coming out at 9 AM this morning. We are anticipating further improvements in the IFO business climate figure, moving back up to 89.3 from 86.2. Um, then into the afternoon, we've got durable goods coming out of the US. But otherwise, let's look at the week as a whole. And before I get on to earnings, Tuesday you've got US consumer confidence as the main highlight. Wednesday you've got the FOMC, which is going to be the key event, of course. Thursday is when you get much more busy on the data front. You've got the unemployment and GDP flash readings coming out of Germany, and then the eurozone consumer sentiment and consumer confidence final readings. But the main event will likely be the US GDP Advance reading. And again, we're looking for that spectacular figure, but largely for the markets to look beyond that and through some of the, the headline sensationalism. And then you've got the weekly jobless claims, which of course were a little bit of a trigger point last week because it was the first time since March that we saw a very minor uptick in that reading. So people will be watching that quite closely. Then on Friday, you've got the Chinese Manufacturing PMI Chicago PMI coming out of the US alongside the University of Michigan number, albeit that being the final reading. So that's, that's kind of the main kind of landscape for the week in terms of the fixed events that we're aware of. We've also got to continue to monitor the US-China situation. Not a great deal new to report other than the consulate story that was developing last week. That moves us then finally on to earnings. And earnings season really does step up a few gears. We've got 192 companies reporting out the S&P 500 this week. That includes almost half of the Dow, so 12 out of the 30 Dow Jones Industrial Average companies. Um, probably the most, um, significant day is going to be on Thursday. You can see here the aftermarket, you've got Amazon, you've got Apple, you've got Alphabet. The other big days to look out for, you've got Facebook aftermarket on Wednesday. That day also includes pre-market Boeing, General Electric. Um, pre-market on Tuesday, you've got Pfizer, McDonald's, 3Ms, some big Dow components again as well. Then you've got the likes of AMD aftermarket on Tuesday, which of course was a massive beneficiary of the weakness that we've had in the delay in production at Intel last week. It'll be quite interesting one to watch. And then at the end of the week, we get some of the oil majors, so ExxonMobil, Chevron, Caterpillar as well, somewhat of a bellwether for general global perception, uh, given the demand on their goods and services. So yeah, quite a busy week on the earnings front, so definitely keep that noted on your calendars for the day today, particularly given the large amount of Dow components and then generally on, on Wednesday, Thursday for some of those tech mega-cap names, which obviously have been such a definitive driving point for market sentiment. Equally so in Europe, things start to pick up in the UK and Europe. So for the pharmaceutical companies, if you're trading the FTSE, you've got Glaxo and AstraZeneca. You've also got Shell and Lloyds reporting this week. In mainland Europe, you've got the likes of SAP, BASF, Volkswagen. In France, you've We've also got Sanofi and Total, the two of the largest market cap names there in the CAC 40. But on that note, just a quick look at an overview of the equity market. I'm going to start with the NASDAQ from a technical perspective. And just looking here, technically speaking, quite— and it's a bit hard to see with my video camera just above, so let me just move this. So this is the story of the NASDAQ. And it's been obviously some fairly sizable moves that we've had over the last 2 weeks. This was that rolling back of the reopening process in California and a bit of a pickup in the US-China trade tensions. Then we had that, that exact retest of the all-time high last week before then we started to move back lower. Now a couple of key areas here in the near term to watch, I guess, on the intraday perspective. It's going to be around that 10,546 mark. You can see here that's been a pretty decent level that the market has responded to on prior occasions. So on the upside, be keeping an eye there. And equally on the downside, if I was looking at the broader ranges here in the market, uh, down at 10,388.5 to encapsulate some of these previous areas of significance as well. So that's the kind of near-term range. On a daily continuation I guess the picture looks a little bit more clear. And, you know, on Friday we had such a great test of that. You know, this is an unaltered chart in terms of some of these levels that have been marked up. And that's that trendline, the bottom trendline we've been looking at going all the way back to April, the various tests that we've had in, in April, in June, in late June and then on Friday. And as we drop through, you can see what we had last week was something on Thursday, we tested that 21 DMA, bounced, found support. But then that Friday, last day of the week, we managed to push below there. And you can see how rapid the pushdown was, but finding some support around a really key area, both from that trendline but also that horizontal kind of previous resistance resistance now turned support, bounced back off that quite aggressively. So for the moment, you're now being capped somewhat by that 21 DMA. So be keeping an eye on that and also be keeping an eye on that trend line as we go out through, through the week. It'll be a really significant level to watch for the tech firms and/or tech stocks. And as I said, you've got the big tech majors coming out, and that could definitely give a catalyst for potential retests and push back higher to all-time highs, or breach of these key technical levels, and perhaps then a bit of a pullback down to $10,000. Or even a really key level here would be around $9,000, uh, $7,620 type levels, which would be again that trendline level around 29th, but also the previous all-time high that was seen prior to the pandemic situation, which was around 97.60. So that's the, the NASDAQ story. Just want to have a quick look at the S&P and then the DAX, and then we'll wrap things up. So as far as the S&P is concerned, again, looking at the near-term ranges here, there's a few areas that are fairly interesting from the, from an intraday perspective. On the upside, 3223.5, that's held into in terms of the overnight Asia-Pacific session. That was that high from the late European morning on Friday, and you can see the markets responded on prior occasions. So that's the upside near-term level that I'll be keeping a close eye on. Then equally so on the downside, you can see going all the way back to that Moderna gap up that we had— you remember that on the 14th going into the 15th session? That's the— your, your kind of downside level. So again, this near-term range, you've got the pivot as well on the daily price action. But as we go forward in the coming days, be keeping an eye here. 3191.5 would be a key area on the daily. What does that look like? Well, this is that annotated chart I've had rolling for, for a number of weeks. And, you know, coming off the top on the renewed US-China tensions, as I said, I think a little bit of a profit-taking, particularly tech-inspired, given the outperformance performance that we've had in those major market cap tech names. But you can see a real firm area of support here for the S&P, and that being around that bottom end of that range we were just talking about. Really, if we, if we break down here, 3191.5, then if we continue to go below that point, there is a bit of a gap down then to the next areas of interest. So that's going to be a real key area for week. It's found support at around those levels, around 31, kind of 95, for since really the middle of the month. And so that will be, that will be key for the week. And then for the DAX, finally in European equities, let's have a quick look what we've got. So yeah, significant level again to the downside kind of a key band of support I've been watching at 12,771.91. If we're going to perform like this on the intraday upside, the pivot levels held, which was also the late Friday high in the futures. So just keep an eye on the upside. You need to break out through these current tests around close proximity to where we're trading at the moment. Certainly we could liven up quite quickly in the DAX under a more positive scenario get a quick push up to around 12,900 would be probably quite likely. On the flip side though, again, keeping an eye on those downside levels, strong area of support here across a lot of these major indices just given some of the pullback that we've had. And so yeah, let's see how it, how it plays out. So that's pretty much it really for, for the briefing for today. Not much more else for me to cover, so any questions feel free to leave a comment. Always absolutely happy to help. Don't forget to like and subscribe to the channel. More daily briefings coming every weekday, of course, and content delivered by the rest of the team over the weekend. So hopefully it's all beneficial for your guys' trading and further development. But have a, have a great week ahead, and I'll see you same time tomorrow. Thanks very much.