Gold
Fundamental Analysis
This week saw a plethora of geopolitical data influencing the risk sentiment on global markets as economic growth concerns re-emerged in the form of a new strain of Covid hitting China and further sanctions being imposed on Russia’s fossil fuel exports to Europe. These sanctions come on the back of Russia being accused of war crimes in the city of Bucha where hundreds of civilians in the town were allegedly tortured, raped and murdered by Russian soldiers.
These developments increase the likelihood of Russia’s exclusion from the global economic environment being prolonged and as such increase uncertainty and risk appetite from investors. This combination of factors revived gold’s appeal as a safe-haven asset this week as it bounced off the $1 913 level and held its consolidation within the range of $1 944 and $1 913 per ounce.
Technical Analysis
In terms of technicals, the head and shoulder pattern has fulfilled itself as previously discussed in the last two editions of this newsletter, from the $1 966 area, down to the $1 890 area in the form of an impulsive move. Following this impulse from the monthly low on the 29th of March, we have had a corrective move back to the $1 950 area in the form of an ascending channel, followed by an extended consolidation in the form of a bear flag where the price has been ranging this week as discussed above.
What we can project from here onwards, should the price exit the bear flag, is an impulsive move downwards to continue the trend towards the $1 884 area. Conversely, if the flag fails and price breaks above the $1 960 level in an impulsive nature, we can expect a small correction back towards the top of the current range at $1 940 and expect the bulls to enter the market and flex their muscles, leaving the $1 980 area open to being challenged.
Oil
Fundamental Analysis
This week we see global oil prices head for their second weekly drop since the United States announced its largest-ever oil reserve release last week, causing the price to fall below $100 a barrel briefly. This drop in price is a direct cause of increased supply entering the market, and we can expect a further drop in price because of the announcement made by the International Energy Agency, which has the market expecting an additional 120 million barrels of crude and oil products from emergency stockpiles aimed at cooling global oil prices following Russia’s invasion of Ukraine and the subsequent sanctions that have followed.
Technical Analysis
In terms of technicals, we saw the price pullback at the beginning of the week to form weekly highs around the $105 area, where sellers took control and moved the price further down to the low of the week on Thursday around the $92 area. The underlying fundamentals support a further move down to around the $90 area where we could see buyers potentially enter the market. Our clue for this potential reversal is in the corrective manner the price is approaching these key levels in the form of descending channel. This sluggish behaviour is an insight into what could unfold next – buyers entering the market and shifting the order flow.
Cryptocurrency
The Bitcoin price is at an interesting juncture in its progress over the past two to three weeks. After breaching a massive hurdle around the $45 000 area, the price broke out, edged higher and then started correcting back into the range over the last couple of days. Despite this pullback, the general probability is still pointing towards further upside potential towards the $52 000 level.
Technical Analysis
In terms of technicals, we are back inside the range that we popped out of two weeks ago. However, the nature of this pullback is corrective and this gives us insight into what is probable – an impulsive move upwards.
Buyers are likely to enter the market around the $40 000 – $41 000 demand zone and if this scenario plays out as projected then we could see bulls take control of the market and head to the final hurdle of $52 000, and a break above this will open the door for bullish momentum to test the $60 000 psychological level that was set last year around October. Conversely, if this setup fails, then we could see sell pressure move all the way from the current price to the $36 000 level.
The Optimal Play
The U.S. dollar index made a robust move to 100 for the first time in nearly two years today, this comes on the back of the prospects of a more aggressive pace of Federal Reserve interest rate hikes forecast for May. Factors influencing this exuberance range from geopolitical uncertainties stemming from the economic costs of the war in Ukraine as well as the upcoming French elections which are poised to be a nail-biting event for the Euro-zone. While the fundamentals may have been fluctuating, we have expected and even predicted this surge in the strength of the greenback for three weeks now in previous editions of this newsletter just from our technical analysis.
Looking Back
Last week’s prediction:
In our technical analysis last week we identified a reversal pattern in the form of a falling wedge forming around the key support area of 97.70. We predicted that buyers would enter the market and move price all the way to the top of the range that we have just broken out of in the middle of this week.
This week’s results:
The pattern has fulfilled itself as predicted, and if you had dollar exposure on your portfolio at the time that we made this projection, your portfolio would be in significant profits. The impulsive nature of this move gives us a clear insight that this strength is likely to be sustained and open the way for the price to reach the 101 mark as investors pile onto the safe-haven currency.
If you would like access to an investment that can protect and grow your capital through dollar exposure, kindly contact Aluma and one of our FSCA approved financial advisors will get in touch and discuss how we can diversify your portfolio for you.
