SAFEHAVEN Demand Would Likely Propel YELLOW METAL To $1750.00!
Last year it was highly anticipated that the yellow metal would break the years long held trading range and make a new high. Well all that is unraveling pretty quickly to say the least, as the trade war enters its second year with no end in sight. The two year long and ongoing trade war between the worlds two largest economies has led to fear of recession in the U.S as the yield curve inversion getting deeper and deeper. In EUROPE (germany) a technical recession has already happened with the manufacturing activity declining two consecutive times.
Trump is hell bent on reducing imports from china and making the USD weak for more competitiveness in regards to exports. The FED is already feeling the pressure of the tradewar but they keep insisting that they would keeping use\ing ''wait and see approach'' for interest rate cut or hold. TRUMP wants the FED to cut rates so as to make the USD weak. Major central banks have already started easing around the globe so as to combat the effects of the trade war with exception of the FED. Markets are pricing in the FED would reduce the rates by 120BP by end of 2020 but as of the moment the U.S economy seems to be in a pretty good state and FED are pleased with the current interest rates. However with the trade war's no end in sight, the U.S economy might start to loose steam and print negative/declining data in the coming months. If this happens the FED will start easing making the USD plunge against the SAFEHAVEN pairs.
Many like to BUY and HOLD the USD because of its SAFEHAVEN status, therefore even if the FED cuts the interest rate to boost the economy in the future, the USD would not fall that much unless the economic data keeps on declining or a recession happens! Other SAFEHAVENS include the JPY &CHF currencies. These two FX currencies are the go to when RISK OFF mood dominates the market. However there is a catch behind buying and holding these two currencies. The central banks of both these countries (SNB & BOJ) prefer their currency to remain weak so as to keep their exports cheap and competitive. For this reason the central banks of both these FX currencies observe and act if needed to keep the currency from sliding or appreciating too much. All in all the go to SAFEHAVEN currencies have limited gain as their central banks tends to intervene.
Talking about the YELLOW METAL, Who has the power to intervene here? practically no one,as its purely based on supply and demand characteristics and due to this there is a high potential of appreciation for yellow metal in RISK OFF environment. Since the beginning of the year, the price has sky rocketed and there is still a very likely high chance that it would keep climbing upwards. A better and safer way to trade this precious metal is step by step based on breach of certain resistance levels and the fundamental outlook of the health of global economy.
Here in the main chart we see can the green horizontal lines which represent resistance levels and red horizontal lines which represent support, drawn from the monthly charts. Currently the price is stopped climbing at 1550.00 which is a concrete resistance yet to be broken on monthly TF. Should 1550.00 break (the monthly candle close above 1550.00) the next target would be 1750.00. Its looking highly likely that this level would be broken, at the moment the price is in consolidative phase as there is a hope of a trade deal looming. But markets are too smart to believe TRUMP and CHINA! Because just like before,this period represents the CALM before the STORM. In the coming weeks we would be able to see how are the negotiations proceeding and is a disagreement likely to happen again or not?
unless a complete trade deal is struck and held by each side, we could see the yellow metal ascend pretty fast to 1750.00 and potentially beyond. For this particular scenario, we need to wait for the monthly candle to close above 1550.00 and then its safe and suggested to go LONG to target 1750.00
This just represents my outlook and analysis on this pair. shall a trade opportunity appear i will post it in a new thread. Cheers
Trump is hell bent on reducing imports from china and making the USD weak for more competitiveness in regards to exports. The FED is already feeling the pressure of the tradewar but they keep insisting that they would keeping use\ing ''wait and see approach'' for interest rate cut or hold. TRUMP wants the FED to cut rates so as to make the USD weak. Major central banks have already started easing around the globe so as to combat the effects of the trade war with exception of the FED. Markets are pricing in the FED would reduce the rates by 120BP by end of 2020 but as of the moment the U.S economy seems to be in a pretty good state and FED are pleased with the current interest rates. However with the trade war's no end in sight, the U.S economy might start to loose steam and print negative/declining data in the coming months. If this happens the FED will start easing making the USD plunge against the SAFEHAVEN pairs.
Many like to BUY and HOLD the USD because of its SAFEHAVEN status, therefore even if the FED cuts the interest rate to boost the economy in the future, the USD would not fall that much unless the economic data keeps on declining or a recession happens! Other SAFEHAVENS include the JPY &CHF currencies. These two FX currencies are the go to when RISK OFF mood dominates the market. However there is a catch behind buying and holding these two currencies. The central banks of both these countries (SNB & BOJ) prefer their currency to remain weak so as to keep their exports cheap and competitive. For this reason the central banks of both these FX currencies observe and act if needed to keep the currency from sliding or appreciating too much. All in all the go to SAFEHAVEN currencies have limited gain as their central banks tends to intervene.
Talking about the YELLOW METAL, Who has the power to intervene here? practically no one,as its purely based on supply and demand characteristics and due to this there is a high potential of appreciation for yellow metal in RISK OFF environment. Since the beginning of the year, the price has sky rocketed and there is still a very likely high chance that it would keep climbing upwards. A better and safer way to trade this precious metal is step by step based on breach of certain resistance levels and the fundamental outlook of the health of global economy.
Here in the main chart we see can the green horizontal lines which represent resistance levels and red horizontal lines which represent support, drawn from the monthly charts. Currently the price is stopped climbing at 1550.00 which is a concrete resistance yet to be broken on monthly TF. Should 1550.00 break (the monthly candle close above 1550.00) the next target would be 1750.00. Its looking highly likely that this level would be broken, at the moment the price is in consolidative phase as there is a hope of a trade deal looming. But markets are too smart to believe TRUMP and CHINA! Because just like before,this period represents the CALM before the STORM. In the coming weeks we would be able to see how are the negotiations proceeding and is a disagreement likely to happen again or not?
unless a complete trade deal is struck and held by each side, we could see the yellow metal ascend pretty fast to 1750.00 and potentially beyond. For this particular scenario, we need to wait for the monthly candle to close above 1550.00 and then its safe and suggested to go LONG to target 1750.00
This just represents my outlook and analysis on this pair. shall a trade opportunity appear i will post it in a new thread. Cheers
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.