High spending, high inflation and an economy that seems to be stagnating, yet the Dollar continues to rise against other major currencies. How is this possible and how long can it continue for?
Economic Growth and Global Sentiment
While the global economy is recovering as people learn to live alongside Covid, the delta variant is continuing to spread and hamper economic growth. Regardless, the sentiment continues to shift towards risk-on. The US is in a no-mans-land of sorts when it comes to economic growth at the moment. GDP is increasing quickly but is somewhat overshadowed by the similarly high inflation rate. The unemployment rate is falling but job numbers continue to be underwhelming. Despite this, the Dollar's unique advantage of being able to perform in both sentiments enables it to continue to outperforming other currencies.
Threat of National Debt and a Debt Ceiling Crisis
The debt ceiling is a limit on the amount of national debt that can be incurred by the Treasury that limits how much money the government can spend thus limiting how how they may pay on the debt they already borrowed. This debt ceiling has been reached many times in history but every time congress has made exceptions. However as Biden continues to spend and parties become more divided, what will happen when the government inevitably reaches the debt ceiling next is uncertain. Should the debt ceiling not be raised the government will be forced to default on their debts, the economy would near collapse and selling bonds in the future would become significantly more challenging.
Interest Rate Betting
Four months ago the Fed stated its intent to raise interest rates twice in the next two years, its probable that as time goes on an inflation continues to increase investors are betting on this happening sooner than later. This is backed up by the falling price of Gold. Gold is seen as a hedge against inflation, so this could be investors speculating at a decrease in inflation caused by an increase in interest rates.
Hey everyone! Welcome to this week's forex forecast for the week ending October 29th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDCHF, GBPUSD, GBPJPY & XAUUSD.
Price broke out of the rising wedge pattern a couple of days ago, and price is already making its way to the downside to complete the chart pattern. Our first level of potential support is at 0.91, where we have seen in the past price has been struggling to break through; once we reach this level, look out for a break and retest before continuing the downwards ride on this pair.
Price is currently near the top of this descending channel, and we're now waiting on a precise touch and rejection to continue the trend and head lower. For now, there aren't any other specific levels where we could see consolidation, but unless we see lots of bears selling early, it's possible financial institutions could manipulate price towards 1.40 to stop out early sellers.
Last week we saw price break through 156.0, the previous high in the long-term ascending channel, and we're now seeing price retrace and retest this key horizontal level. What we see next could decide where price will go next, whether we'll see price fall below it could suggest further bearishness, whereas if we see price instantly reject this, it's likely we could see further bullishness, and price could head towards the top of this channel much quicker.
Gold continued to consolidate slightly between 1765 and 1800, and we saw price reach highs of around 1812 last week, but sellers quickly rejected this. For now, we're waiting on some significant catalysts to push price in a certain direction, as we just see back and forth moves for the time being.
Hey everyone! Welcome to this week's forex forecast for the week ending October 1st, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDCHF, EURUSD, EURAUD & USDCAD.
I usually look at Gold every week as part of this Weekly Forex Forecast series, however I have done a deep dive article on Friday, click the link here to take a look if you're interested in my outlook on Gold.
Price has formed a rising wedge chart pattern in the medium term. We can see bulls were firmly rejected at the resistive trend line last week and is now heading towards the supportive trend line for a possible breakout. If we see continued USD strength like last week, we will likely see price reverse soon and once again head for new highs in the wedge. With upcoming NFP news, if we instead see negative outcomes for the USD and a rise in unemployment, we could see price break out of this wedge and likely head towards the bullish order block at 0.90 formed from the weekly timeframe.
Price has closed below the channel's bottom in this descending channel below the 1.16 key horizontal level. We will likely see price enter the channel once more and retrace the bearish move it made last week. Service sector PMIS for Italy and Spain, France, Germany and the Eurozone are due out on Tuesday. The German economy will be in the spotlight as we have factory orders, industrial production and trade data rolling out throughout the week. Remember, a positive result for NFP on Friday will push prices lower.
Price has formed a key horizontal level in the medium term at 1.59, where we are seeing price is now nearing once again, forming a head and shoulders pattern with this being the neckline. Look out for a break and retest of this support level, to see if price confirms it as new resistance, and if so it's likely we'll head towards the next key levels such as 1.57 where we have seen price act as both resistance and support in the past at the ascending triangle pattern.
Price is forming an ascending triangle pattern with resistance holding just above around 1.28. Currently, we see price near the supportive trend line, and we're now looking out for price action confirmations of a rejection to catch a potential reversal to the top. It's likely we'll still see consolidation continue below the resistance, as we're still pretty wide to closing the gap.
Hey everybody, this is a breakdown of some of the macro trends around Gold and some of the pressures it is facing from inflation and the Fed's potential rate hikes.
As of 09/26/2021, the Gold Continuous Contract is down -0.75% this week, and -3.79% for the month. Gold is currently caught in a limbo between rising inflation and rate hikes from the Federal Reserve. Inflation is positively correlated with the price of Gold, but there isn't much inflation despite all the liquidity introduced by the Fed.
Bank of America/Merrill Lynch theorizes that Chairmen Powell will announce that QE tapering on November 3rd. The first rate hike to occur in 3Q23 and continue on a quarterly basis. The Fed currently wants inflation as it will juice the economy. If inflation pushes beyond that zone, they may decide to increase rates. Short term inflation is a large concern because of supply line disruptions in the market. If the supply chain cannot meet the demand, then the prices of goods could kick off a bout of inflation that shoots us past the 'Troublesome Zone'.
The key variable is time. If inflation rapidly increases, the fed will move up their 3Q23 plan. If this occurs, the market could react by buying Gold to hedge against a sudden inflationary episode that grew out of the Fed’s control.
The Gold Mining sector is trading below the 10 year Net Asset Valuation, which indicates that the miners themselves are currently undervalued, particularly the Jr. mining stocks. If the price of gold were to swing in favor of the miners, there is more pressure to revert to the mean
After a little digging, I found a Bloomberg Index fund that tracks the price of Gold with incredible accuracy. The following chart shows the top 7 major market indices with the strongest correlation to gold.
SOURCE: World Gold Council
The index with the highest correlation is the Bloomberg Barclays Global Treasury Index, which is pegged to the Global bond market, excluding US bonds and other treasuries. Both foreign bonds and Gold have an inverse relationship with the dollar, but the BBG Global Index is useful for forecasting the overall trend of gold as it offers a less volatile perspective. Due to its high correlation to gold and it’s relatively low volatility, one can chart the overall direction of gold with near 70% correlation. This correlation holds back to 2015.
The benefit of having only a .70 correlation coefficient as opposed to 100% correlation, is that it allows us to see through the "static" of Gold's volatility. The best example is near the end of the chart: GLD moves up near 6.00%, but eventually corrects down to conform with the overall downtrend signal given by the index fund.
Hey everyone! Welcome to this week's forex forecast for the week ending October 1st, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDJPY, GBPUSD, GBPNZD & XAUUSD.
Price closed off for the week just above the resistance at 110.6 in this range bound market. Look out for how price reacts to this level, whether we see further bullish momentum continue pushing price higher, or if we see price retrace it's move and reject off the resistance, or if we see price fall back below the resistance and once again confirm the level as continued resistance as price heads back lower again, filling the gaps it's left behind.
We saw price reverse off the daily order block at 1.361 and is showing signs of a retracement to that move. Look out for how price reacts to the same order block, and if it will act once again as an area to go long off. If we see price push below this will turn this zone into a breaker block, an area to go short off.
Price continuing to consolidate in the middle of this range between 1.92-1.97. Look out for a clear break outside the short-term key levels acting as support and resistance which are 1.935 and 1.955. If price breaks above 1.955 it's likely we'll see further movements towards the breaker block at 1.97 whereas if we see price break below 1.935 it's likely we'll see price push towards 1.92.
Price is currently sitting inside the bullish order block and we're now waiting for a catalyst to push price outside the OB. If we see price continue going lower and break below the zone, this zone will become a breaker block, an area to go short from. Currently, in the short-term, we are seeing a descending channel form in the past couple of weeks, and hence unless price forms a new trend, a breaker block situation will be likely.
Let's look into the Bank of England's Monetary Policy Summary which took place on Thursday the 23rd of September, 2021.
The minutes of the MPC meeting revealed that discussions about inflation showed that might not be as transitory as expected. Further, it highlighted the uncertainty around the labour market regarding wages inflationary pressures due to labour shortage.
The Pound rose after the latest Bank of England (BoE) rate decision. The central bank left interest rates unchanged at a record low of 0.10%. The bank will continue with its asset purchase plan to support the economy costing £875B. The bank is also revised the country's growth forecast for the year to 2.1%, down from 2.9%. However, there's still a broad understanding that the BoE cannot solve the ongoing challenges facing the UK right now, an example would be controlling the spread of the Delta variant, ongoing supply shortages or the issue of inadequate workers.
The Committee voted by a majority of 7-2 for the BoE to continue with its existing programme of UK government bond purchases, financed by the issuance of central bank reserves, maintaining the target for the stock of these government bond purchases at £875 billion and so the total target stock of asset purchases at £895 billion. The two dissenters were Dave Ramsden and Michael Saunders, who voted for an early end of the program by decreasing purchases with a target of £840B.
Alongside this, the BoE noted that some developments have meant that the case for tightening has strengthened, which in turn has prompted a shift in money markets pricing in a 15bps rate hike for March 2022 vs Previous May 2022. That said, the March meeting is not a quarterly meeting like February or May, making it unlikely that a hike will take place in March.
G/U broke above 1.37 to 1.375 in response to a slightly more hawkish than expected statement, nearing the middle of the range between 1.36-1.39. We saw price bounce from the bullish order block at 1.361, the same support level that price has been bouncing off over the past month. It's likely we could see price retrace and collect final orders before continuing its bullish move towards resistance at 1.39.
Hey everyone! Welcome to this week's forex forecast for the week ending September 24th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDJPY, EURUSD, GBPJPY & XAUUSD.
Price has been consolidating between 109-111 over the past couple of months, and we recently saw price bounce off the range's support back to the middle of the consolidation zone. Look out for a clear break above or below this structure to catch the new trend, following subsequent retests and rejections.
Huge moves rejecting the channel's top last week on E/U as price breaks below 1.18 and is now nearing the major key horizontal level 1.17. This level has been seen as major support over the past year or so, so look out for how price reacts to this level once we see price clearly enter. It's likely we could see the trend continue and price reaches the channel's bottom, before potentially retracing and making a move back towards 1.18.
Looking at the long-term trend on G/J price has recently touched and rejected off the previous high in this range at 156.0 and is now potentially making its move towards the downside. Currently, we have an ascending channel where price is actually at the bottom, and we're now waiting on clear confirmations whether price will break or respect this channel. If we see price break outside the channel, we'll likely see price continue the long-term trend and head towards the downside.
Price is once again back at the bullish order block at 1740, where financial institutions will push price towards before a reversal to take out traders who went long early, most likely at 1765. If we see price break below this zone, this area will become a breaker block, an area to go short off following subsequent retests and rejections.
Analyst / Writer: Sean Streb
● The price of Uranium is up 47% in the last 30 days.
● Sprott Physical Uranium Trust initiated a massive ‘at the market’ purchasing initiative for
● The trust company believes that demand will vastly outstrip supply and mining
capabilities in the coming years as nations increase their green energy programs in the
form of newer fission reactors
● The price increase in Uranium is highly correlated with Sprott purchases.
State of the Market
The savvy commodities trader may have noticed that the price of Uranium stocks have
skyrocketed to new highs in the last few weeks. Those who were out of the loop were
left scratching their heads and wondering: Why has the price of this radioactive metal
gone nuclear? The answer to this is not very clear. It has certainly made waves as a
“meme investment” on the internet, but the underlying companies don't seem to support
their current value. In the current market, Uranium miners sell their product at a loss.
Hard as it is to believe, it actually costs more money per pound for these firms to mine
Uranium than the market is willing to pay. In order to stay operational, these firms are
required to purchase uranium to meet their committed sales and to maintain a minimum
inventory. The end result is that these firms have been forced to operate at a loss for
The recent Q2 2021 Management Report for Cameco Corporation (CCJ) published on
June 30th shows that the company’s Average Unit Cost of Sales is $47-$48 per pound
of Uranium. For comparison, the spot price of Uranium on June 30th was around $32
per pound, a $15 to $16 deficit. To cap this all off, COVID19 hit Uranium miners very
hard, forcing them to close several of their mines.
On paper, virtually none of the miners in this market, even the larger firms, look like an attractive buy. In the short term, it is possible for a firm to operate at a loss. In the long term the company, or in this case, the underlying commodity (Uranium) will either correct, or the firm will go out of business. Since Uranium is, and will continue to be a valuable commodity for manufacturing and energy, bankruptcy is unlikely.
But did the price spike up recently?
The answer to this lies with a new player in the game. In comes the Sprott Physical Uranium Trust (TSX: U.UN). On August 17th, this trust company publicly announced an at the market buying initiative for the radioactive metal. Sprott is purchasing an immense amount of Uranium, and advertising this initiative as a step towards a carbon free energy future. Directly from the August 2021 Fact Sheet: as of the 31st, Sprott currently holds $741,169,791 worth of physical Uranium and they are continuing to purchase more.
To add another dimension to this phenomenon: the current demand for Uranium outstrips the supply. Current global demand fluctuates around 200 million pounds of Uranium, when companies are barely mining at all. Given global production is at 125 million pounds, there is a 75 million pound deficit in production. For more information see the image below, courtesy of Sprott's August 2021 Investor Fact Sheet:
Bank of America/Merril Lynch Analysts also made note of a stunning correlation between the Price of Uranium, and the purchasing habits of Sprott Trust. Given the nature of the Uranium marketplace, it is not surprising to see why Sprott has such an influence on the market.
A combination of factors make Uranium, and Uranium Miners a compelling trading opportunity and a long term investment. The market currently undervalues the metal as supply isn’t meeting demand at current market prices. Based on this factor alone, the price needs to correct or the companies themselves need to adjust their strategy.
The purchasing habits of entities like Sprott indicate a far thinking view of the future of where carbon free renewable energy plays a larger role in developed nations. As countries move away from fossil fuels, they may incorporate more nuclear energy. Uranium, unlike gold, generates interest in the form of power generation and is frequently used in manufacturing. This means there is opportunity for future growth.
One important thing to follow in the future is the narrative surrounding nuclear power generation. Nuclear power will see wider adoption if it is framed as a green energy alternative to fossil fuels. If this begins to occur in the public forum and media, Nuclear power generation will increase, and by proxy, the demand for Uranium will increase.
A quick look into the ECB Press Conference which took place on Thursday the 9th of September, 2021.
As expected, the ECB stood pat on rates and held the size of its PEPP envelope at €1.85T. The key adjustment to the policy statement was that purchases under PEPP were to be conducted at a “moderately lower” pace compared to Q2 and Q3; some commentators have suggested this would equate to around €60-70B p/m vs current circa €80B.
At the follow-up press conference, President Lagarde noted that the Euro area economic rebound is in an increasingly advanced stage, and output is set to exceed pre-pandemic levels by the end of this year.
Subsequently, for the accompanying economic projections, the central bank’s 2021 growth forecast was upgraded from 4.6% to 5.0%, with the base-effect spill over resulting in a minor tweak lower to the 2022 growth view, from 4.7% to 4.6%, while 2023 growth view was left unchanged at 2.1%.
The ECB still characterises inflationary pressures as transitory, however, its 2021 inflation projection was lifted from 1.9% to 2.2%, 2022 CPI forecast was raised from 1.5% to 1.7%; 2023 was revised up a touch from 1.4% to 1.5%, and thus it still sees inflation below target at the end of its forecast horizon.
Lagarde went on to state that the decision to slow purchases, and the wording in the statement, was unanimously agreed. For those looking for clues on “life after PEPP”, the President remarked that discussion will take place at the December meeting.
That said, Lagarde reassured markets that when PEPP "was done,” the job of the ECB would still not be complete, as the Governing council attempts to reach its inflation mandate.
Overall, Thursday’s release failed to deviate much from market expectations, with the ECB slowing purchases in Q4 and refraining from giving much in the way of clues as to how PEPP will most likely transition into a beefed-up annual payment plan.
I've been sharing my thoughts on E/U over the past couple of weeks, and have been pointing out the bearish order block underneath 1.19, which we did indeed see price reverse from a couple days ago.
Currently, we're seeing price hold just underneath this medium-term descending channel where we're now waiting on further confirmations as to where price could be heading next.
If price continues to stay below the channel's top, and slowly push lower, it's likely we could see the trend continue and price head towards the channel's bottom. If we do see yet another break higher, the order block will become a breaker block, and essentially an area to go long from.
Hey everyone! Welcome to this week's forex forecast for the week ending September 10th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at EURUSD, GBPUSD, GBPNZD & XAUUSD.
Price has closed off for the week in the bearish order block just underneath 1.19, and we're now waiting on further moves to take place, to establish whether price will either respect this zone and reverse or continue breaking higher from the descending channel it has just broken out of. Most retailers by this point have been stopped out who went short at the channel's top and are likely going to go long now; however financial institutions usually reverse once more and head back towards the original position.
Price is back once again at this 1.388 key horizontal level which has been seen as clear support and resistance over the past couple of weeks. I made a deep dive on this pair as price was forming the descending triangle, and now that price completed that pattern move, price is now once again back at this level and just under its resistance. If price manages to break higher, we should wait for a confirmation of a retest before going long.
Over the past couple of months, price has been consolidating around this breaker block between 1.96 - 1.98 and we're finally beginning to see a break out of this zone. Price is currently heading towards the previous resistance and new support level from the ascending triangle at 1.92, and liquidity is likely pulling price towards this level. There is an order below where price will likely head to swell to stop out retailers who will go long early before potentially reversing.
Price has closed off for the week just below the resistance in this consolidation zone I've been pointing out between 1800-1835. We're now waiting on clear confirmations whether price will either respect of break this level and if we see a break of this trend. If price closes above 1835, we'll likely see price head higher towards the liquidity void ant around 1890. If price does in fact respect this level and go below, we'll likely see further consolidation on this pair.