Weekly Market Overview | 29 April 2022
Gold saw a slight gain in strength in Thursday’s London Session, finding support around the $1 872 area, on the back of disappointing U.S GDP numbers being released which reinvigorated some buying interest in the safe-haven metal. The reason for this gain in value relates to the fact that the FED has had the rhetoric of aggressive tightening in recent weeks, but the poor GDP numbers could take some pressure off policymakers to act as aggressively as once hinted. This has effectively given gold a bit of a lifeline and knocked the dollar back momentarily but the fundamentals point to this move being short term, as the current sentiment is still somewhat Risk-Off.
In terms of the raw price action, this area of strong support was revealing itself to us during the course of the week before the economic data was released. We can see this in the sluggish way the market approached the area, in the form of the descending channel which alluded to the probability of a reversal occurring in this area, and it was subsequently confirmed by the impulsive move out of this channel. What we can expect from here onwards is a small correction back towards around the $1 894 area where more buyers will potentially enter the market and create a second wave to complete the pattern. Conversely, sellers could enter close to the current price and if they take control of the market, we could see a potential break below the newly found support zone mentioned above.
The price of Oil gained some ground this week despite fears of a slowed down demand because of China’s fresh round of Covid-19 lockdowns. The world’s largest crude oil importer has caused the market in recent weeks to have a perception that the price of oil would take a slight drop because of the reduced demand coming in from China, but oil has remained buoyed despite this and the cause is the increased likelihood that Germany will join other European Union member states in an embargo on Russian oil, which will further increase the supply shortage on the global market.
The technical analysis had us already primed and ready for this recent bounce and strengthening of the price. We pre-empted this move last week, as we began to see the price move in a corrective descending channel to retrace the first impulse that took off from around the $92 area. From here onwards we can expect the second impulsive wave to move the price all the way towards the $110 level where sellers will surely be tested who are holding positions around these levels.
This week saw another milestone for the cryptocurrency space as lawmakers in Panama approved a bill to regulate the use and commercialisation of crypto assets in the Central American country renowned as a hub of offshore financial services. This move is a big confidence boost for the legitimacy of cryptocurrencies as an alternative store of financial value. The legislation opens the door for the public and private use of cryptocurrencies and will make it possible for residents to pay taxes with cryptocurrency.
In terms of price action, we see the premature impulsive move upwards that was made in the preceding weeks, and we are still currently locked back within that range, until such time as the downside objective has been fulfilled which is to grab downside liquidity before triggering a full-blown impulsive move that should break above the $49 000 area. The pattern is still pointing towards an overall bullish outlook until such time as the low around the $33 000 area has been broken impulsively
The Optimal Play
This week saw the Value of the Dollar tap a 20-year high and pull back as investors took profits on dollar gains off the table. The final push which caused the index to strengthen is largely due to the combination of expectations for U.S. rate hikes and growth concerns in China and Europe. The question for most investors remains whether or not the dollar’s rise will continue in May, with the global market beginning to stabilise gradually.
In terms of price action, we can see that we have been locked in a sideways range since 2015, and now we are back at the top of the range, testing 20-year highs. The probable move from here onwards is for the price to smash through the top of this range in search of liquidity, and beyond that is dependent on how the price reacts at those levels. It’s either we will see a gradual pullback towards the broken highs and form a continuation which will keep the current bullish sentiment. Conversely, if we close the monthly candle with a spike above the range and the body of the candle closes back inside the range, we could see sellers take control of the market at these high levels.
The optimum play is still pointing toward dollar strength as we have been predicting over the past several weeks. If you would like access to an investment that can provide your portfolio with dollar exposure, kindly contact us and one of our FSCA approved financial advisors will get in touch.