Open Account Trading Carries Risk

T-Bond market rallied further yesterday pointing to an expectation that today’s US CPI data would show a sharp decline in the monthly CPI growth. The analyst consensus expectation is that the April CPI change would be only 0.2%. This would equal a 1% drop in the growth rate since March. Yesterday natural gas prices rallied again suggesting traders and hedgers alike are still betting Russia will use energy as a weapon against Europe. Russia might not be the military power it was thought to be but it certainly has the power to squeeze the European leaders by possibly cutting the gas supply to Europe. This would likely create unrest in the countries that are highly dependent on Russian gas. Stock markets around the globe traded lower yesterday as investors reduced risks from their portfolios and the price of gold kept on its downward slide hitting multiple targets I had provided you with. I sincerely hope you made some points yesterday! By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

In today’s report trade ideas, analysis and key technical levels on

  • USNGAS – Bullish after a strong reversal rally
  • XAUUSD – Key price levels for the CPI release

Get live updates on my analyses and trade ideas here:

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USNGAS 1h chart 05 11

USNGAS rallied strongly from the 6.477 support reversing the down move seen over the previous two days. Therefore I’m looking for long trade opportunities in this market above a minor support level at 7.20. My first target is at 7.968 and the second target is at 8.90. Whilst Russia might not be able to compete with Nato countries when it comes to traditional warfare (see yesterday’s commentary here) it’s more than capable of leveraging its stranglehold over European energy supplies. This means the upside risk in the natural gas market is so enormous that hedgers and traders alike are likely to position themselves accordingly. Practically this means that it’s highly likely that there’s more buying interest than selling or shorting interest in this market. Against this background, my targets are rather conservative. But as always, trade only what you see and not what you expect to see. Alternative scenario: USNGAS drops below the minor support at 7.20 and trades back to yesterday’s low. If there are no buyers we should expect to see the price move to 6.30.

Gold 8h chart 05 11 1

Gold was really good to us yesterday! Not only did the market trade to my intraday targets at 1857.64 (T1) and at 1852.45 (T2) but it also moved down to my swing trade target at 1841. For those interested, I provided these trade ideas here: and here: I’ve left the target levels on the chart for those that want to study my methods. As we don’t know what the CPI number will be and we don’t know what the market reaction to the number is going to be it doesn’t make sense to try to provide a trade idea in gold for today. Instead, because I know how many of you trade gold I provide you with the next best thing: The key price levels. They help you to see the market structure and to read price action at these levels. The 1850.39 – 1865.25 is the first key price range. It coincides with the 23.6% Fibonacci retracement level which adds to its relevance. The key price level is the 1866,08 resistance. Note that we have the 38.2% retracement coinciding with the level and the SMA(20) at 1867.90. The next key support level is at 1821.16.

Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal ReserveFed hiked by 0.5% in May but according to Powell 0.75% hikes are off the table. 
StimulusThe Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe. 
YieldsThe US 10-year treasury yield has risen to 2.187% as investors sell the bonds and adjust to the expected rate hikes. 
EmploymentThe March nonfarm payrolls increased by 431K while the analyst consensus had predicted 492K new jobs. The unemployment rate dropped to 3.6% and average hourly earnings were in line with expectations (0.4% vs. 0.4% expected). 
InflationThe annual headline inflation reading for March came in at 8.1%. This was the highest CPI print in 40 years.

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The Next Main Risk Events

  • USD – CPI m/m
  • USD – Core CPI m/m
  • NZD – Inflation Expectations q/q
  • GBP – Prelim GDP q/q
  • USD – PPI m/m
  • USD – Core PPI m/m
  • USD – Unemployment Claims
  • USD – Prelim UoM Consumer Sentiment
  • USD – FOMC Member Mester Speaks

For more information and details see the TIOmarkets economic calendar here.

Trade Safe!

Janne Muta

Chief Market Analyst

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