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Weekend Market Analysis 28 May 2017

May 27th, 2017

Conclusion

The US$ started to correct up this week and the Euro is beginning to weaken which all needs to happen if gold is to continue down to a 6 month cycle low in June. However, the US$ is forecast to weaken considerably in the long term after the current short term strength, and this supports near term gold weakness followed by considerable strength thereafter.

US$

The US$ started to rise this week out of the down cycle after 39 days which it needed to do if gold is to continue down to a 6 month cycle low in June.  This is in tandem with the Euro which is now beginning to weaken, and the US$ could potentially increase to the resistance trendline at the level of 99.

 

The Euro has strengthened strongly after the French election result but has reached short term resistance and has begun to weaken this week.

The US$ is forecast to weaken considerably in the long term after the current short term strength. Consider the 9 year weekly chart with the slow Stochastic oscillator at the top indicating Dollar strength when the Stochastic reaches down to the 20 level (blue circle). However, after this near term strength the Dollar will resume a downward trend away from long term resistance toward long term support. The 1st phase decline target is 94.5 and the final decline target is 86.

These movements support near term gold weakness to a 6 month cycle low in June followed by considerable gold strength thereafter.

Gold

The criteria for the likelihood of a June 6 month cycle low as listed in last week’s analysis still holds good, and is now additionally supported by the currency market movements recently. The US$ long term expectation is for the currency to weaken substantially and therefore the more numerous financial commentaries calling this the start of the next leg up in the gold bull market.

The gold chart is also therefore just a repeat of last week’s chart.

 

The US Fed released minutes of the May meeting last week and it confirms the likelihood of a rate hike at the June FOMC meeting on the 14th. This will provide Dollar short term strength and corresponding gold short term weakness. But, as with the previous hikes, gold is likely to respond positively to this.

 

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