S&P GSCI Total Return Index

200 day ma eroded, risks shifting to downside

The S&P GSCI Total Return Index has been sidelined over the past few weeks but is now breaking down from the 200 day ma at 4851. Near term risks are shifting to the downside.

We suspect that the market will now remain capped by the 4990/5000 region, and we should see a slide back to the October low at 4789.

This remains the break down point to key support, which remains the 4 year uptrend at 4658. We would expect to see this hold the initial test. Please note that the 200 week ma lies at 4806.

Only a move above 5185 would imply ongoing strength to  the 5400 2012 high. Currently we are neutral to negative – the market is sidelined longer term.

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AUD/USD – has reached the 200 day moving average at .9749, allow for profit taking

AUD/USD has maintained upside pressure to reach the 200 day moving average at .9749. We would anticipate that this will provoke some profit taking and would recommend tightening stops on long positions/lightening positions.

Beyond this, the current Elliott wave counts are suggesting that we then look for an extension of the upmove towards 0.9920, the 61.8% retracement of the same move. Here we also find the 55 and 200 week moving averages at .9910/25 and here we expect to see failure.

Immediate upside bias is maintained above the .9545 6 week uptrend.

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Varied picture on the metal markets

At present, the specific situation on the metal markets is being overshadowed by general macro data and political imponderables. The fundamental data, however, should not be ignored. The autumn meetings of the various International Study Groups have provided an insight into the situation on the respective metal markets, revealing extremely different trends: while the supply of copper and nickel is being expanded, the situation for zinc and above all for lead is becoming ever tighter.

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EMFX – Sell volatility, buy diamonds

EMFX – Sell volatility, buy diamonds. A variety of idiosyncratic changes and an easing in external financing conditions have improved the landscape for EMFX in recent weeks. The short term environment will likely remain conducive to further muted gains for selective EMFX.


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Gold – Daily Chart

The break out of the 1350/1251 trading band will be key for the medium term trend

Gold continues to confound us with it having sharply risen a couple of days after we had reinstated our bearish outlook.

We are technically clearly at a key juncture for the development of the next medium term trend which is why we have once again neutralised our forecast.

As long as the 1330.17/1349.31 resistance area (July, late September and early October highs and 55 day moving average) caps on a daily chart closing basis, we will continue to favour the downside.

A fall through the current October low at 1251.58 will reinstate our bearish view and lead to the 78.6% Fibonacci retracement of the June-to-August advance at 1234.40 and the next lower June and July lows at 1208.08/1180.04 being targeted. The long term downside target remains to be seen in the 1162.45/1154.72 support zone. A daily close above 1349.31 will be bullish, though, and put the 200 day moving average at 1434.71 back on the map.
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EUR/PLN – Daily Chart

Tries to stabilise above the 4.1443 September low which remains in focus, though

EUR/PLN is stabilising above the 4.1443 September low but at the same time rema ins below the 200 day moving average at 4.2037 and thus continues to look weak.

Further range trading, mostly with a negative bias, should be seen into year end with the currency pair expected to stay below the 4.3098 September high.
As long as this is the case the odds favour a retest of the September low at 4.1443.
Failure there on a weekly basis will mean that a top has been formed with the 200 week moving average at 4.1189 then being in focus. It should be reached by the end of the first quarter of 2014.
Good resistance above the 200 day moving average at 4.2037 can be seen between the 55 day moving average at 4.2205 and the late September high at 4.2403.
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Emissions trading on hold

After spring saw prices of EU emission allowances slide to a record low, recent months have seen a slight recovery. This tallies with the fact that supply looks set to be tightened in the next few years by temporarily withholding allowances, a process known as backloading. In view of high surpluses, Brussels thus continues to dictate the direction. Price supportive fundamental factors are forced to take more of a back seat. We expect a qualified majority to vote in favour of backloading and thus anticipate that prices of allowances will pick up.

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EUR/USD – Daily Chart

Is heading up to the 1.3670/1.3711 major resistance zone

EUR/USD’s current sharp rally has further to run. It is expected to rise above the current October high at 1.3646 and should reach the major 1.3670/1.3711 resistance area which should cap, though. It is made up of the 2004 high, April 2007 and 2010 highs as well as the January 2013 peak.

Upside pressurewill be maintained while EUR/USD trades above this week’s low at 1.3472.

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EUR/CZK – Daily Chart

In view of the September failure swing we expect the 25.00 region to be revisited during 2014

In late September EUR/CZK shot up to 25.99 before strongly reversing its short term trend and dropping towards key support at 25.475/46. It is made up of the June low and the 38.2% Fibonacci retracement of the 2012-13 advance and, although it may hold for a few days or even weeks, this support area is expected to give way in October or November.

Failure at the 25.475/46 suppor t zone and at the next lower 25.38 March low would make us medium term bearish and lead to the February low at 25.18 and the 200 week moving average at 25.165 being back on the map. These levels are expected to be reach ed by the end of the first quarter of 2014.

Further down lies the Dece mber 2012 low at 25.05 which should be reached within the second quarter of 2014.

We will retain our overall be arish view while EUR/CZK trades below the 25.99 September high.

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NZD/USD – Daily Chart

Bounces off the 200 day moving average at .8183 and targets the .8462/.8500 region

Our short term NZD/USD forecast has been changed from bearish to bullish now that the 2013 resistance line at .9397 has been breached.

The September high at .8437 should also soon be bettered with the 78.6% Fibonacci retracement at .8465 and the .8500 region also being targeted. In this area the currency pair may well struggle, however.

In case of a more pronounced advance being seen, the .8588 late April high and the 2011-13 resistance line at .8627 could also be reached.

We will retain our short term bullish forecast while NZD/USD trades above last week’s low at .8232.

Unexpected failure there this week would neutralise our view and put the 200 day moving average at .8183 back on the cards.

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US 10Y T-Notes – Daily Chart

Are beginning to keel over and target the 55 dma at 124-26 on their way to the 122-07 low

December 10Y T-Notes recently failed slightly below the 50% retracement of the May-to-September decline at 126-295 and are now trading back around the 38.2% Fibonacci retracement at 125-26.

Our anticipated down leg towards the 200 week moving average at 119-20 should have begun last week.

The first downside target can be seen along the 55 day moving average at 124-26, followed by the 123-235 September 18 low.

We will maintain our bearish forecast while the futures contract trades below the 50% retracement at 126-295.

Above it meanders the 200 day moving average at 127-13.

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Gold – Daily Chart

Continues its downtrend and targets the 1208.08/1180.04 support zone next, then 1162/1155

Gold continues its descent and since it now clearly trades below last week’s three month low at 1262.72 we have reverted to a bearish outlook.

The first downside target is the 78.6% Fibonacci retracement of the June-to-August advance at 1234.40 but the next lower June and July lows at 1208.08/1180.04 represent more significant targets for the weeks to come.

The long term downtrend is expected to take the gold price to the 1162.45/1154.72 support zone, made up of the January 2010 high, July 2010 low and the 61.8% Fibonacci retracement of the 2008-11 uptrend.

We will retain our negative outlook while gold remains below the late September high at 1344.55.

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Will the US exorbitant privilege destroy itself?

The FX market still is relaxed about the US budget crisis, given that a last-minute solution seems to be likely again. We argue, however, that the developments so far pose a long-term risk for the dollar. US politicians one day might damage the US dollar’s status as the world’s dominant currency, whatever they will do to solve the current crisis.

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EUR/PLN – Daily Chart

Continues to gradually slide back towards the 4.1443 September low

EUR/PLN is now trading below the 200 day moving average at 4.2019 and continues to look weak.

Further range trading, mostly with a negative bias, should be seen into year end with the currency pair expected to stay below the 4.3098 September high.

As long as this is the case the odds favour a retest of the September low at 4.1443.

Failure there on a weekly basis will mean that a top has been formed with the 200 week moving average at 4.1188 then being in focus. It should be reached by the end of the first quarter of 2014.

Good resistance can now be seen between the 55 day moving average at 4.2268 and the late September high at 4.2403.

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Gold – Daily Chart

We will remain neutral but only as long as
last week’s low at 1262.72 underpins

Last week Gold briefly made a three month low at 1262.72.

While this level underpins we will retain our neutral outlook because a triple divergence with the daily RSI can be seen. This points to a possible reversal higher being made which is why we remain neutral but only while above 1262.72.

The odds of a reversal higher being made will increase only if a daily close above the late September high at 1344.55 has been made. In this case a rise to above the 1375.37 September 19 high is likely to also be seen with the 2013 resistance line at 1383.78 then being in focus.

A drop through the current October low at 1262.70 would change our view back to being bearish again and push the 1200/1100 region back to the fore.

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Surpluses wherever you look – and 2014 is coming into view

There are signs of global record crops on wheat, corn, soybean and rapeseed markets. While this will significantly improve the supply situation for corn, the stocks-to-use ratio for wheat should drop further. This outlook and reports that heavy rainswill significantly reduce the sowing area for winter grains in Russia and the Ukraine have driven wheat prices up in relation to corn. This should continue until US corn acreage is reduced in 2014 on the back of the weak price development. Given the good supply situation, soybeans, rapeseed and cotton are unlikely to manage any large price leaps either.

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US Dollar attempting to stabilise at key support

Sell off by the US Dollar Index has held key support at 79.61 but should soon head higher again
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What is behind the recent fall in US crude oil stocks?

US crude oil stocks have fallen significantly during the summer months. This was mainly attributable to an increase in crude oil processing. In this way US refineries reacted to robust demand for middle distillates, which is reflected in low US distillate stocks and record US distillate exports. As crude oil processing declines, US crude oil stocks will likely rise again in the fourth quarter. Robust US distillate exports are exerting pressure on refinery margins in Europe, which will probably increase Europe’s dependency on imports of oil products.

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S&P GSCI Total Return Index – Daily Chart

Sidelined around the 4851 200 day ma

The S&P GSCI Total Return Index is seeing some signs of stabilisation circa the 200 day ma at 4851. Currently the near term rebound is indicated to terminate circa 4950, while trading sub 5000 we will consider that the market remains vulnerable on the downside.

The market recently failed just ahead of 5165/85, this is the location of the 61.8% retracem ent of the move down from 2011. Near term risks remain for further losses.

We should see a slide back to the 4 month support line at 4710. Key support remains the 4 year uptrend at 4645. We would expect to see this hold the initial test. Please note that the 200 week ma lies at 4800.

Rallies will now find initial resistance now at 5000. Only a move above 5185 would imply ongoing strength to the 5400 2012 high.

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