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North American News

S&P 500 closes at the highs as last week’s big drop is erased

  • Great rebound for stocks

On the day:

  • S&P 500 3.0%
  • Nasdaq +3.2%
  • Russell 2000+3.0%
  • DJIA +2.6%

On the week:

  • S&P 500 +6.4%
  • Nasdaq +7.5%
  • DJIA +5.4%

US May new home sales 696K vs 588K expected

  • US May 2022 new home sales report
  • Prior was 591K (revised to 629K)
  • Sales change +10.7% vs -16.6% prior
  • Supply 7.7 months vs 8.3 months prior
  • Median price 449K vs 390.4K a year ago

Commodities

Gold Price Forecast: XAUUSD lifts to $1820s from weekly lows on falling US Real yields, and a soft greenback

  • Gold is headed for the second consecutive week with losses, down 0.64% despite climbing on Friday.
  • Lower US 10-year TIPS yields and a softer US dollar are a tailwind for Gold prices.
  • Gold Price Forecast (XAUUSD): Gold is neutral-downward biased.

Gold spot (XAUUSD) bounces off weekly lows near $1816, recovering some ground in the week, reclaiming above the $1825 mark courtesy of a soft US Dollar amidst a trading day with upbeat market sentiment and elevated US Treasury yields. At the time of writing, XAUUSD is trading at $1826.56, up 0.23%.

Sentiment improved despite Thursday’s dismal US S&P Global PMI, which showed the US economy is slowing. US recession fears increased after Friday’s University of Michigan Consumer Sentiment on its June final reading plunged to 50. However, inflation expectations, unveiled in the same report, were lowered, which began to be priced in by market players, who backpedaled an aggressive Fed, now expecting the Federal funds rate (FFR) to top around 3.50%.

Before Wall Street opened, the St. Louis Fed President James Bullard spoke at a panel alongside the RBA’s Governor Philip Lowe. He said that fears of a US recession are overblown and commented that the US would be fine. He added that tightening policy will slow down the economy to a trend pace of growth and expects the need to move the FFR near 3.50%.

At the time of writing, the San Francisco Fed President Mary Daly is crossing wires. She said the Fed doesn’t need to think about the endpoint of the balance sheet yet, and added that the central bank would communicate regarding that. Daly’s said that she does not see a recession.

In the meantime, the US Dollar Index, a measure of the buck’s value vs. a basket of currencies, dives 0.16% to 104.238, contrarily to the US 10-year Treasury yield, which is rising two basis points, yielding 3.117%.

Elsewhere US 10-year TIPS (Treasury Inflation-Protected Securities), a proxy for US Real yields, slumps two bps at 0.556%, a tailwind for the yellow metal that usually benefits from lower Real yields augmenting appetite for precious metals.

Meanwhile, the US 10s-2s yield spread remains positive at 0.071%, though it remains to push towards 0%. A reading below 0% would imply that traders forecast a recession in the US.

Friday US economic calendar featured June’s UoM Consumer sentiment on its final reading alongside further Fed speaking.

Gold Price Forecast (XAUUSD): Technical outlook

XAUUSD is in consolidation, though it remains below the 200-day moving average (DMA) around $1844.79, suggesting that gold bias is neutral-downwards. Also, the Relative Strength Index (RSI) is at bearish territory at 44.87, signaling that selling pressure remains on the non-yielding metal, but the lack of a catalyst that moves the price above/below the range kept it trapped in the $1825-50 area.

Upwards, Gold price resistance levels would be the 200-DMA at $1844.79, followed by $1850 and the 50-EMA at $1861.07. On the downside, XAU/USD’s support levels would be $1800, followed by the May 16 low at $1786.50 and the YTD low at $1780.18.

Silver Price Analysis: XAG/USD rebounds from multi-week low, not out of the woods yet

  • Silver dropped to a six-week low on Friday, confirming a bearish break below the $21.00 mark.
  • Any meaningful recovery attempt could be seen as a selling opportunity and remain capped.
  • The XAG/USD now seems vulnerable to weaken further below the $20.00 psychological mark.

Silver reversed a knee-jerk slide to a six-week low and was last seen trading with only modest intraday losses, around the $20.90-$20.85 region during the early North American session. That said, any meaningful recovery still seems elusive and attempted recovery runs the risk of fizzling out rather quickly.

Sustained break and acceptance below the $21.00 round-figure mark could be seen as a fresh trigger for bearish traders. Moreover, technical indicators on daily/4-hourly charts are holding deep in the negative territory and are still far from being in the oversold zone. This, in turn, supports prospects for further losses.

Hence, a subsequent slide back towards challenging the YTD low, around the $20.45 region set in May, looks like a distinct possibility. Some follow-through selling should pave the way for an extension of the downward trajectory and pave the way for a fall to the $20.00 psychological mark en-route the $19.35-$19.30 support.

On the flip side, momentum beyond the $21.00 mark is likely to confront resistance near the daily high, around the $21.15 region. Any further recovery might still be seen as a selling opportunity near the  $21.50-$21.55 supply. This, in turn, should cap the XAG/USD near the $21.70 area, or the 200-period SMA on the 4-hour chart.

WTI crude oil is $1.40 away from finishing the week higher

  • A look at crude oil

Oil has been a crazy trade this week with the commodity getting pounded — seemingly without an oil-specific catalyst — only to start a bounce on Wednesday.

Crude ended last week at $109.56 and sank as low as $101.53 on Wednesday. Now it’s trading up $4 today to $108.19. If it can gain another $1.40, it could finish the week in positive territory.

Even now, there’s an incredible disconnect in the market. Energy company stocks have been brutalized this week, with some falling 20% and yet the commodity is scarely negative. Some of that speaks to the drop in natural gas prices but it’s largely about recession worries.

In terms of price action, the slow climb followed by a sharp correction is a classic bull-market signal. It’s the old ‘up the elevator, down the escalator’ move.


EU News

European equity close: French stocks post their best day in months

  • Closing changes for the main European bourses
  • Stoxx 600 +2.6%
  • German DAX +1.7%
  • UK FTSE 100 +2.7%
  • French CAC +3.4% — best day in more than three months
  • Italy MIB +2.3%
  • Spain IBEX +1.8%

On the week:

  • Stoxx 600 +2.2%
  • German DAX -0.1%
  • UK FTSE 100 +2.6%
  • French CAC +3.2%
  • Italy MIB +2.6%
  • Spain IBEX +1.3%

Other News

US Supreme Court overturns Roe V. Wade

  • This was leaked

The decision from the US Supreme Court eliminates the constitutional right to an abortion.

This is not market moving and a dissenting opinion was leaked so it’s not a big surprise. It will add to the division in the US. Thirteen states have ‘trigger’ laws that ban abortion automatically with this decision.


Cryptocurrency News

A pattern of explosions of volatility in bitcoin, then nothing

  • Sideways trading at the moment

Generally in markets, volatility breeds volatility.

In bitcoin lately though, there’s a period of huge moves followed by periods of relative dormancy. For this entire week, the range has been $19,586 to $21,696.

For a normal asset, that 9.7% range is wide but it’s miniscule compared to the recent norm in BTC. It’s a tough one to understand and what makes it especially confounding is that something similar happened in April and May.

I suspect there’s some kind of natural stabilization mechanism in play here, or it’s a strange coincidence.

In any case, I think the trade here now is to wait for a clear break of the range and go with it. That’s a bit tough to do on the downside because of that quick spike low on the 3AC liquidation.