IMF global GDP forecast sinks energy prices
The markets certainly became livelier today as traders from all around the world were back at their trading stations. Day 2 of the IMF conference was also a market mover as they started to let us know how they see the next couple of years panning out in terms of GDP and inflation. The US dollar didn’t move much so I am half expecting these moves today, to be unwound but that might have to wait until after Thursday’s central bankers’ speeches.
Market Wrap
Precious metals and energy dropped hard today on the scheduled news releases from the USA and Canada. Gold had held up relatively well from the London open to the first London fix at 10:30 am. On an intraday chart the 30m swing highs were higher and so were the swing lows. However, at the stroke of 13:30 pm when the US housing data and especially the US Building Permits Number came in the precious metals collapsed by more than 1%. Currently gold is -1.21% lower and silver is down by -2.60%, with the daily moving averages coming into play.
With silvers ActivTrader sentiment reading so high at 88% bullish I am not surprised that we are seeing today drop, however, I am surprised at how much they squeezed the price to the long side before pulling the rug and on what data they decided to do so.
The US dollar index hasn’t particularly moved very far so I am going to keep an eye on the $1963/oz level in gold which is the afternoon London fix to see if we find resistance there over the next couple of sessions. The IMF meeting today announces that countries will have to increase their rates higher and “well above” neutral levels to fight inflation. Higher rates will at some point meet rates of inflation and take the real rates out of the negative territory, which will be bad for precious metals.
The bigger moves came in the energy markets with the WTI, Brent, and GasOil dropping -4.44%, -4.59%, and -4.76% respectively. Again, this was partly down to the IMF announcing that they forecast global GDP to come in lower than its previous forecast of 4.4% to 3.6%. This if it comes true would signal a potential larger drop in demand for oil etc.
Brent found the daily low from the 24th of March to act as resistance again, so if the dynamic support of the daily moving averages holds, we now have a bunch of buys stops sitting at that level or just above, which if triggered would help accelerate Brent above $120 per barrel. I have also labeled the sloping trend line as a possible support level to keep an eye on as there is a daily high from the 11th of April that these shorts will be targeting as a potential profit-taking level. Today’s drop was accelerated by the Libyan National Oil Corp. (NOC) declaring a force majeure at their Brega oil port due to blockades.
The forex heatmap clearly shows the AUDJPY as the currency pair we should have been trading today, with the rest of the currencies shifting about and not producing a clear risk signal. In today’s video, I detailed a way to get involved in a well-defined trend by anticipating a level to trade on a pullback.
The buyers kept control of this market without having to come back into the weekly range or test the exact highs of the breakout level. A close back above the 8-period moving average was the trigger to get long and in doing so the 95.00 level was tagged with more room to the upside, especially while the ActivTrader sentiment indicator is so biased to the downside.