As we approach the end of the quarter, the global economy has set the fertile ground for more growth. Cutting interest rates and extended stimulus has been the prime action taken by several countries–notably in South East Asia. Meanwhile, the American and British central banks are pondering on a possible rate hike. It remains difficult to predict but it is a matter of when and not if.
The Federal Reserve has unanimously chosen not to raise interest rate for a while. Instead, Fed Chair Janet Yellen sounds rather dovish after her remark at the strong U.S. dollar. A healthy correction on the dollar is underway while we reckon this is only temporary at best. There were various discussions about the strong dollar which affect the equity market. Any plans for a rate hike look set to delay until June or September period. Further evidence of better than expected economic data will drive the need to raise interest rates.
Mark Carney and the Bank of England have a lot to juggle as they look to inflate the British economy in the second quarter of 2015. Interest rate is already very low; inflation at zero and with austerity plan set by the current government, Britain may need to embrace deflation for a short while. Anymore cut in the interest rate has been ruled out and other policies may be in place to kick start the economy again.
Finally, there is some light at the end of the long tunnel for Greece. Some aid money will be release for the Tsipras government to pay their creditors after reforms were agreed with Miss Merkel.
This week promises to end with a bang as there are flurry of economic data that could swift the weight on the current U.S. dollar strength. Expect precious metal prices to consolidate but should react abruptly if there are nasty surprises on those data. All eyes will be on the current dollar strength – long live King Dollar.
Bullish engulfing candlestick stood out from last week commentary. Hedge funds are busy unwinding their short positions for profit and the bears ease off the selling pedal. Obviously the U.S. dollar correction play a significant part; allowing gold prices to rocket higher with resistance at 1205, 1225 and 1244 respectively from the Fibonacci retracement line January 2015 high. Our shorts were stopped out in a momentary flash after the Yemen bombing or shall we say one big whale unwinding short to shock and awe the market. Our argument remains bearish since we see a stronger dollar which will continue to drive the market.
Should upper resistance hold then a potential head and shoulders to resume downtrend?
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