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Free Forex Trading Signal July 2016 (EURUSD, Gold)

  • Market: Forex, Metals
  • Assets: EURUSD, Gold
  • Forecast: Gold Uptrend Continuation (↑), EURUSD to Range

General Outlook

The global financial markets can still feel the vibrations of the Brexit earthquake. The panic of the first few days is gone but there is still high uncertainty regarding what happens next in Europe. The political turmoil is expected to last for quite some time as Poland and other Eurozone members have started to doubt the France/Germany leadership, and as Scotland will probably demand a new referendum regarding its independence. In the current environment, any forecast is particularly risky. Nevertheless, going long on gold seems a good idea whatever happens.

Our Previous Trading Signal

In our previous Trading Signal (late April 2016), we forecasted EURUSD to range without clear direction and commodity currencies to move lower in May 2016. We said “May 2016 is expected to be a corrective month for commodity currencies. If you want to go long on commodity currencies it seems wise to wait for a correction in May”. Actually, a correction in the price of commodity currencies did happen in May, and it was quite intense (6-9%). At this moment, we are optimistic regarding the performance of commodity currencies.

 

EURUSD Technical Analysis

Everyone is seeking stability nowadays and EURUSD is a good tool for stabilizing financial markets, at least to some extent. EURUSD is expected to continue ranging during summer 2016.

Resistance (↑) 1.126-1.127 | 1.137 | 1.142 | 1.149-1.150 | 1.160-1.162

Support (↓) 1.0828 | 1.070-1.074 | 1.050-1.051 | 1.042

Chart: EURSUD Broader Range (D1, RSI, MACD)

EURUSD is expected to continue ranging during summer 2016

The Gold Price Outlook as 2013 Ends

The Long Bearish Gold Price Journey is about to Take a Break

Gold is expected to make a short-term bullish break (correction) before it continues its Long-term Bearish Trend.

  • Current Gold Price: $1,202.73
  • Short-Term Target: $1,233, $1,250, 1,270, $1,320
  • Stop-Loss: $1,179-$1,185
  • Long-Term Target: $1,088

But before investigating further the future course of the Gold Price, let’s evaluate the previous TCI signal on GBPUSD and GBPJPY.

The Previous TCI Signal of Trading Center

On the previous signal, TCI has indicated a correctional bearish trend of GBPJPY. By that time GBPJPY was traded at 167,591. After some trading days, GBPJPY reached 166,500 (December, 17th), at that levels the demand for British Pounds proved strong and turn GBPJPY bullish again.

Gold more than any other precious metal face wide price fluctuations from year to year. There are many factors affecting the price of gold (fundamental and psychological factors). The demand and the supply for gold are changing due to variables such as government policies, currency volatility, and investment strategies. Gold has been a major performer over the last decade and the main reasons for that were: i) The global economic uncertainty (especially in US and Eurozone), and ii) The increase of demand from Asia (Jewellery and Investment Gold). Gold prices have increased from $300 per ounce in 2000 to $1,665 per ounce today (February 2013).

Chart: Gold Price 10-Years (February 2003-February 2013)

Chart: The Price of Gold (2003-2013)

Gold Price 52Wk High 1,801.5 USD (-7.49%)

Gold Price 52Wk Low 1,538.1 USD (+8.35%)

20-Day Price Average 1,673.4 USD

100-Day Price Average 1,712.0 USD

 

Can Gold Remain Hot in 2013? -Some Insights from Expert Analysts

But can this gold rally continuous in 2013? Can the gold price gets as high as 1,900 USD or is it time for a strong correction which can bring the price of gold even to 1,500 USD?

Many gold analysts argue that higher gold prices seem inevitable in 2013, and also they support that the lower end of the price range is fixed and reached already. Other analysts argue that the gold price has lost its momentum and that it is now by far more expensive than other commodities.

Some Insights from Experts

-Goldman’s analysts support that the gold price rally will end in 2013, after peaking at about 1.850 USD.

-BNP Paribas is forecasting new price highs for 2013 and 2014 and an average price of 1.750 USD in 2013.

-The Bank of America’s research estimates an average gold price of $2,000 in 2013 and a strong move to $2,400 in late 2014.

-Barclays analysts are forecasting gold price around $1,800 in 2013, while they are expecting a US Dollar appreciation against Euro.

 

The Role of FED: High Inflation or Dropping Unemployment may Crush the Price of Gold

Historically, the price of gold is highly related to the FED monetary policies. If the US economy sees an inflation increase over 2.0% {1,7% today} or the unemployment ratio to drop below 6.5% {7.9% today}, then FED is expected to raise US interest rates. According to that scenario, the US dollar is expected to get stronger and the price of gold will probably crush, even to 1,500 USD. Let’s not forget that the price of gold is measured in US Dollars and thus when the US Dollar gets stronger the price of Gold gets weaker. Furthermore, the level of US interest rates is highly affecting the price of gold, as it may motivate investors to sell gold in order to exploit high-interest rate returns.

 

The Supply for Gold in 2013 and the Role of China

The gold supply during the last two years was relatively unchanged causing no impact on the price of gold. As Societe Generale’s analysts argue, the supply of gold is expected to rise both in 2013 and in 2014. The reason for that is that gold production will rise in China significantly. China today is buying foreign gold mines, in the same way, that it does it for any other commodity that it needs. From the other hand, the consumer demand for gold is increasing in China, following the rise of middle class incomes.

 

China Gold Reserves Relative to other Economies

China’s gold reserves represent only 0.75% of China’s GDP in 2012. That same figure in the US is 2.95%, while it is 9.50% in Switzerland, 5.50% in Germany and 1.75% in India. That is creating a long-term opportunity for the price of gold as increasing demand from China may push Gold price at higher levels.

The price of Gold is crushed but the bear market seems to come to an end.

The price of gold crashed on Monday the 15th of April in levels below 1,340 USD per ounce. This current bear market has started on October the 4th 2012 when the gold price closed at its peak of 1,791.8 USD per ounce. Today and as the gold price reached 1,320 USD it seems this bear market moves too fast lately. Using TCI analysis we are going to investigate if it is time for a bear market rally.

TRADING SIGNAL MARKET CURRENT PRICE TARGET STOP LOSS

$1,350 per ounce

(4/15/2013)

$1.459

$1.419

Stop-Loss:

$1.319 per ounce

But first let’s evaluate the results of our previous trading signal on Dow Jones Industrial (April, 22 2013)

The Previous TCI Trading Signal on Dow Jones Has Been Proved Accurate

Our previous signal on Dow Jones Industrial has forecasted a bull market that will last until the 5th of April 2013 / 9 April 2013. Actually, the bull market has lasted 3 more days than we have expected. As concerns the target we have placed (in points), that was met with considerable precision. We have placed a target price for Dow Jones Industrial at 14,850 points while Dow Industrial had a high close at 14,865.14 and an intraday high at 14,887.51, both in the 11th of April 2013.

Here is what happened:

Table: Dow Jones Industrial (March, 22 – April, 15)

Date

Open

High

Low

Close

Volume

26-Mar-13

14,447.75

14,561.54

14,447.75

14,559.65

960,300

27-Mar-13

14,559.65

14,559.65

14,439.55

14,526.16

926,800

28-Mar-13

14,526.16

14,585.10

14,520.86

14,578.54

1,537,100

1-Apr-13

14,578.54

14,605.72

14,531.48

14,572.85

914,000

2-Apr-13

14,572.85

14,684.49

14,572.85

14,662.01

984,200

3-Apr-13

14,662.01

14,683.13

14,525.36

14,550.35

1,271,400

4-Apr-13

14,550.35

14,625.24

14,538.72

14,606.11

1,047,900

5-Apr-13

14,606.11

14,606.11

14,434.43

14,565.25

1,312,500

8-Apr-13

14,565.25

14,613.48

14,497.80

14,613.48

1,066,800

9-Apr-13

14,613.48

14,716.46

14,598.50

14,673.46

1,285,800

10-Apr-13

14,673.46

14,826.66

14,673.46

14,802.24

1,205,200

11-Apr-13

14,802.24

14,887.51

14,785.36

14,865.14

1,445,700

12-Apr-13

14,865.14

14,865.21

14,790.57

14,865.06

1,195,700

15-Apr-13

14,865.06

14,865.06

14,598.58

14,599.20

1,616,800

Gold from a Fundamental Point of View

There are two fundamental reasons behind the recent drop of gold. First, it is the weak economic data derived from the Chinese Economy. And note that China drives the global demand for gold during the past decade (jewelry and investment gold). The Chinese economic weakness caused future-demand-drop-fears in other markets too, and especially as concerns other metals and energy. But there is another important development regarding the recent drop in the price of gold. The intention of the Cypriot government to sell gold (worth $500 million) in order to improve its public debt ratios created the concern that more troubled economies will do the same in the future. As concerns, the South of Europe, Italy, Spain, and Portugal are holding great gold reserves.

Here are the Countries with the greatest Gold Reserves

Table: Countries & Gold Reserves

 
Economy Gold
(tonnes)
% on Total Reserves
United States 8,133.5 76%
Germany 3,391.3 73%
International Monetary Fund 2,814.0 N.A.
Italy 2,451.8 72%
France 2,435.4 71%
China 1,054.1 2%
Switzerland 1,040.1 11%
Russia 957.8 9%
Japan 765.2 3%
Netherlands 612.5 60%
India 557.7 10%
European Central Bank 502.1 33%
Taiwan 423.6 6%
Portugal 382.5 90%
Venezuela 365.8 75%
Turkey 359.6 16%
Saudi Arabia 322.9 3%
United Kingdom 310.3 16%
Lebanon 286.8 29%
Spain 281.6 30%
Austria 280.0 55%
Belgium 227.5 39%
Philippines 192.7 12%
Algeria 173.6 5%
Thailand 152.4 4%

Source: Wikipedia

Now here are the greatest gold reserves per person

Chart: Countries & Gold Reserves per person

Other precious metals like silver and platinum and many mining shares from around the world were hit also in the past couple of days.

What TCI suggest about the Current Course of Gold

In order to evaluate the upcoming course of the gold price we are going to use the TCI+ model, The difference of TCI and TCI+ is that TCI+ takes into consideration statistical data from multiple currencies and not only from one single currency (US Dollar). The TCI+ data table below is based on the price of gold as measured in 5 different currencies (USD, EUR, CHF, GBP, and JPY).

In the upper area of the following chart, we can see a Line Chart of the price of gold (USD) during the past 20 years (from January 1983 to April 2013). The red line is the moving average of 180 days which is setting up the master trend for gold. The moving average of 180 days is found today at about $1,688. In the lower area of the chart, we can see the respective indications of TCI+ throughout the past 2 decades.

Chart: The Price of Gold 1983-2013 and TCI+ Indications

Trading Signals: TCI+ on Gold

If we focus on the bear markets of the past 20 years, we may conclude that the levels of TCI+ below -15% are considered high oversold levels. These TCI+ oversold levels have been followed in the past by great gold price rallies. Note that in the 15th of April 2013 TCI+ was found at -14.0% and that means that the bear market is probably coming to an end.

TCI+ Data Table

In the following table we may see the price of gold during April 2013 and the respective indications of TCI+:

Date Gold (USD) MA 180 TCI+
3/1/2013 1,582.3 1,673.26 -3.83%
3/4/2013 1,574.3 1,673.28 -4.35%
3/5/2013 1,579.8 1,673.31 -4.10%
3/6/2013 1,574.0 1,673.31 -4.16%
3/7/2013 1,579.5 1,673.43 -3.06%
3/8/2013 1,581.8 1,673.33 -1.60%
3/11/2013 1,579.0 1,673.26 -1.18%
3/12/2013 1,594.0 1,673.13 -0.84%
3/13/2013 1,589.3 1,672.99 -1.43%
3/14/2013 1,586.0 1,672.89 -1.05%
3/15/2013 1,595.5 1,672.94 -1.38%
3/18/2013 1,603.8 1,673.05 -0.89%
3/19/2013 1,610.8 1,673.13 -0.95%
3/20/2013 1,607.5 1,673.30 -1.17%
3/21/2013 1,613.8 1,673.62 -0.88%
3/22/2013 1,607.8 1,673.69 -1.21%
3/25/2013 1,599.3 1,673.74 -1.18%
3/26/2013 1,598.0 1,673.81 -0.59%
3/27/2013 1,603.0 1,673.97 -0.14%
3/28/2013 1,598.3 1,674.05 -0.64%
3/29/2013 1,598.3 1,674.17 0.58%
4/1/2013 1,598.3 1,674.31 0.70%
4/2/2013 1,583.5 1,674.31 0.41%
4/3/2013 1,574.8 1,674.17 0.43%
4/4/2013 1,546.5 1,673.77 0.20%
4/5/2013 1,568.0 1,673.49 0.55%
4/8/2013 1,575.0 1,673.25 0.58%
4/9/2013 1,577.3 1,673.01 0.72%
4/10/2013 1,575.0 1,672.87 -0.07%
4/11/2013 1,565.0 1,672.69 -0.29%
4/12/2013 1,535.5 1,672.33 -2.23%
    1,671.49 -6.76%
    1,670.32 -10.90%
    1,668.94 -13.35%
    1,669.24 -13.78%
    1,669.53 -14.56%
    1,669.79 -14.60%
    1,670.20 -15.24%
    1,670.59 -15.20%
    1,670.97 -14.88%
    1,671.30 -14.82%
    1,671.63 -15.28%
    1,671.81 -15.96%
    1,671.99 -15.93%
    1,672.03 -16.03%
    1,672.06 -15.54%
    1,672.09 -15.15%
    1,672.11 -15.18%
    1,672.19 -15.65%
    1,672.26 -15.32%
    1,672.40 -15.12%
    1,672.29 -14.89%
    1,672.13 -14.37%
    1,672.02 -13.60%
    1,671.84 -12.66%
    1,671.48 -13.11%

Given the TCI+ analysis, it seems that the purchase of gold in the levels of $1,320 to $1,350 per ounce can be proven really profitable for trading. The first target is $1,419. The second target is $1,459.

 

◘ Giorgos Protonotarios, Financial Analyst

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