First Pullback Following Breakout is Complete

The first pullback following the breakout of a large symmetrical triangle pattern completed at the December 4 swing low of 2.98. That was around the triangle breakout area of 3.02 and it sets the stage for a bullish continuation as prior resistance was tested as support. Today’s breakout occurred two days following a reversal day established on Tuesday, which also generated a higher swing low.

Support at Today’s Low of 3.39

Near-term support is at today’s low of 3.39. A decline below that price could lead to another retest of support around the 20-Day MA, currently at 3.27. As noted previously, the 20-Day line was successfully tested as support on several days recently. Support was indicated by the daily closes above the line, even though earlier the price of natural gas had traded below the 20-Day line. Of course, a key support area is the interim swing low from Tuesday at 3.09 because it generated a higher swing low and holds the second point of a rising trendline.

First 3.64, then 385

A daily close above 3.56 will confirm today’s breakout. There could be a clear pickup in momentum that takes natural gas straight to test resistance around the top of the triangle pattern at 3.64. But given strength indicated following the symmetrical triangle breakout, that price level is expected to be exceeded. Notice that following the November 20 breakout, natural gas quickly took out prior swing highs at 3.16 and 3.09.

That was a sign of strength that should return once the 3.56 high is exceeded. Initial higher targets would then be anchored around a 38.2% Fibonacci retracement level at 3.85. Higher up is an extended target from a rising ABCD pattern (purple) at 4.06, followed by an initial target from a smaller ascending ABCD pattern (red) at 4.33.

For a look at all of today’s economic events, check out our economic calendar.

U.S. natural gas is catching a bid today with two drivers, Art Hogan, Chief Market Strategist at B. Riley Wealth, told Rigzone in an exclusive interview on Thursday.

“On the fundamental side, we have seen forecasts that indicated the potential for cooler air creeping into the Lower 48 to start the new year,” he said.

“On the technical side, we saw a higher low this week, at $3.20 per million British thermal units (MMBtu), than last week, at $3.10 MMBtu, and as such traders are looking for a potential breakout above $3.50 MMBtu,” he added.

“More seasonally appropriate weather, combined with price momentum, seem to be the drivers of price this week,” he continued.

In a separate exclusive interview today, David Seduski, the head of North American gas at Energy Aspects, said “the rally in Henry Hub recently stems from expectations for a colder weather pattern in the U.S. in January”.

“The Christmas to New Year’s week looks like it will be very mild, but there are initial indications that an Alaska Ridge system is forming that typically corresponds with cold temperatures in the United States,” Seduski told Rigzone.

“Essentially, a high-pressure system forms over Alaska and that pushes cold air that typically would move from the arctic into Alaska and funnels it to the United States,” he added.

“If that system fully forms there is certainly a case for higher prices, but the temperatures wouldn’t happen until mid-January probably,” he continued.

“We’ve seen the prompt contract move up all week, but the rest of the curve has seen muted support given weather beyond even early January is very prone to forecast revisions,” Seduski went on to state.

The Energy Aspects representative also told Rigzone that there’s probably some short covering helping boost the rally.

“There’s still a lot of short positions in the market, and as the market moves higher we may be seeing some scrambling to cover in case the January weather pattern does develop and trend colder,” he said.

In another exclusive interview on Thursday, Phil Flynn, a senior market analyst at the PRICE Futures Group, told Rigzone that natural gas is rising “as the U.S. barrels in for the coldest blast of the season”.

“A cold start to winter is increasing the odds that we may see the coldest winter in years,” Flynn said.

“January forecasts are going to be the key … If they trend colder then natural gas will trend higher,” he added.

The U.S. Energy Information Administration (EIA) raised its Henry Hub natural gas spot price forecast for this year and next year in its latest short term energy outlook (STEO), which was released recently.

According to its December STEO, the EIA sees the Henry Hub spot price averaging $2.19 per million British thermal units (MMBtu) in 2024 and $2.95 per MMBtu in 2025. The EIA’s previous STEO, which was released in November, projected that the Henry Hub spot price would average $2.17 per MMBtu in 2024 and $2.90 per MMBtu in 2025.

To contact the author, email andreas.exarheas@rigzone.com

XAU/USD Current price: $2,590.05

• The Bank of Japan and the Bank of England kept rates on hold in their December meetings.
• The United States upwardly revised Q3 Gross Domestic Product figures.
• XAU/USD resumed its slide and aims for lower lows below $2,580.   

Spot Gold came under selling pressure early in the American session after peaking at $2,626.31 during European trading hours. The US Dollar (USD) shed some ground throughout the first half of the day after reaching extreme overbought conditions in the Federal Reserve’s (Fed) aftermath. The United States (US) central bank delivered a hawkish cut, trimming the benchmark interest rate by 25 basis points (bps), while scaling back policymakers’ perspective on potential cuts in the upcoming years.

Global stock markets felt the heat, as most Asian and European indexes settled in the red on Thursday, following Wall Street’s slump post-Fed. US indexes kick-started the new day, trimming part of their Wednesday’s losses, but remain under strong selling pressure, helping the USD resume its advance.

Also backing the Greenback, US data was upbeat. The country published the final estimate of the Q3 Gross Domestic Product (GDP), which showed that annualized growth was higher than previously estimated, confirmed at 3.1% vs. the previous 2.8%.  Initial Jobless Claims for the week ended December 13 declined to 220K from 242K in the previous week, also beating the expected 230K.

Also worth noting is that the Bank of Japan (BoJ) and the Bank of England (BoE) announced their decisions on monetary policy. The BoJ kept the short-term rate target unchanged in the range of 0.15%-0.25%, and give no clues on what’s next for monetary policy. The Bank of England also kept the benchmark interest rate on hold at 4.75%, albeit MPC members delivered a dovish message, reiterating a gradual approach to rate cuts coming up next.

XAU/USD short-term technical outlook

From a technical point of view, the XAU/USD is at risk of falling below its recent multi-week low at $2,582.93. The daily chart shows the pair trimmed almost all its intraday gains. Gold is currently below its 20 and 100 Simple Moving Averages (SMAs), below the longer one for the first time since October 2023. The 200 SMA, in the meantime, maintains its bullish slope around the $2,470 level. Finally, technical indicators offer neutral-to-bearish slopes well into negative territory, far from suggesting the pair may recover again.

In the near term, and according to the 4-hour chart, XAU/USD seems to have completed its corrective advance and is ready to reach fresh lows. The bright metal is developing below all its moving averages, with the 20 Simple Moving Average heading firmly south below the longer ones, reflecting sellers’ strength. Technical indicators, in the meantime, have retreated from their intraday peaks, anyway, set below their midlines.

 Support levels: 2,582.90 2,568.80 2,554.10

Resistance levels: 2,603.20 2,617.55 2,632.00

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• Silver price finds an interim cushion near $29.25 but its outlook remains vulnerable.
• Higher bond yields due to the Fed’s hawkish guidance have weighed on the Silver price.
• The Fed sees only two interest rate cuts in 2025.

Silver price (XAG/USD) finds temporary support near $29.25 on Thursday after plunging almost 4% on Wednesday. The outlook of the white metal remains bearish as the Federal Reserve (Fed) has signaled fewer interest rate cuts for 2025 after cutting them by 25-basis points (bps) to 4.25%-4.50%.

The Fed’s hawkish remarks for the next year have resulted in a rally in the US Dollar (USD) and Treasury yields. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, dropped to near 107.90 in Thursday’s European session after refreshing a two-year high of around 108.30.

10-year US Treasury yields advance above 4.50%. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver.

The Fed’s dot plot showed that policymakers see the Federal Funds rate heading to 3.9% by 2025, suggesting two interest rate cuts next year. In the September meeting, officials had forecasted four interest rate cuts collectively.

The Fed guided a slower policy-easing cycle as the United States (US) inflationary pressures appear to have stalled in the past few months. Meanwhile, Fed Chair Jerome Powell acknowledged that strong growth in the second half of the year is a major reason to move cautiously on interest rates.

Silver technical analysis

Silver price slides to near the 200-day Exponential Moving Average (EMA), which trades around $29.40. The white metal weakened after breaking below the November low of $29.65. The asset has also tested the upward-sloping trendline around $29.50, which is plotted from the February 29 low of $22.30

The 14-day Relative Strength Index (RSI) dropped inside the bearish 20.00-40.00 range, indicating a downward trend ahead.

Looking down, the September low of $27.75 would as key support for the Silver price. On the upside, the 50-day EMA around $31.00 would be the barrier.

Silver daily chart

Created on December 19, 2024

• The crude oil markets in the United States, the West Texas Intermediate Crude Oil market, initially rally during the trading session to break well above the 50 Day EMA but ended up pulling back quite significantly during the session to form a less than attractive candlestick.
• That being said, I don’t know if much has changed in my assessment of this market, because we have to keep in mind there was an FOMC meeting that of course would cause a lot of noise.

Technical Analysis

It’s worth noting that the technical analysis for this pair is somewhat sideways, and of course neutral. This makes a lot of sense, because we are trying to sort out whether or not inflation is going to increase, which obviously is a major component to the oil market. Beyond that, we also have to keep in mind that there are a lot of geopolitical concerns in the Middle East that could keep the market somewhat lightly, so with all that being said I think you’ve got a situation where you could get some geopolitical interference in this market, but right now I think what we’ve got is what could be thought of as a “bottoming process” going on.

The $65 level continues to be a major support level, while the $72.50 level above continues to be a major resistance barrier. In general, this is a market that I think continues to see a lot of questions asked of the market, but we also should keep in mind that the liquidity is probably going to shrink over the next week or so, as we head into the holidays. With this, I’m not expecting much, and I think we are simply going to be stuck with the range that we have been in in the short-term, but sometime in January I would anticipate that the market would probably start rallying to the upside as inflation doesn’t seem to be going anywhere.

Ready to trade the daily crude oil Forex forecast? Here’s a list of some of the best Oil trading platforms to check out. 

• Silver price reached a three-month low at $29.26 on Thursday.
• Non-yielding Silver depreciates as the Fed’s “dot plot,” anticipates only two rate cuts in 2025.
• The BoJ kept the short-term rate target within the range of 0.15%-0.25%.

Silver price (XAG/USD) extends its losing streak for the sixth consecutive session, trading around $29.50 per troy ounce during the Asian hours on Thursday. The price of the grey metal depreciated more than 3% after the release of the Federal Reserve (Fed) interest rate decision on Wednesday.

The Federal Reserve (Fed) delivered a hawkish cut of 25 basis points (bps) at its December meeting, bringing its benchmark lending rate to a range of 4.25%-4.50%, a two-year low. Additionally, during the Press Conference, Fed Chair Jerome Powell made clear that the Fed will be cautious about further cuts as inflation remains stubbornly above the central bank’s 2% target.

The Summary of Economic Projections, often referred to as the “dot plot,” now anticipates only two rate cuts in 2025, a decrease from the four projected in September. This adjustment may be due to robust GDP growth and persistent inflation in the United States (US). Prolonged higher interest rates tend to negatively impact the demand for non-yielding assets like Silver.

Traders will likely observe the US weekly Initial Jobless Claims, Existing Home Sales, and final reading of Gross Domestic Product Annualized for the third quarter (Q3) due on Thursday. These data points could further shape the Fed’s monetary policy expectations.

Moreover, the Bank of Japan maintained its policy rate for the third consecutive meeting, keeping the short-term rate target within the range of 0.15%-0.25% after its two-day monetary policy review, in line with market expectations. Traders expect the Bank of England (BoE) to keep interest rates unchanged later in the day.

Additionally, the industrial outlook for Silver appears constrained due to overcapacity in China’s solar panel industry, prompting photovoltaic companies to join a government self-discipline program to regulate supply.

• Gold price off monthly lows, remains below $2,600 amid the Fed’s hawkish rate cut.        
• The US Dollar consolidates at multi-month highs alongside the US Treasury bond yields. 
• Gold price remains a ‘sell-on-bounce’ trade on the daily time frame.

With the full final week of 2024 almost drawing to a close, Gold price remains vulnerable near one-month lows below $2,600, licking the hawkish US Federal Reserve (Fed) policy decision-inflicted wounds.

Gold price loses $2,600 as Fed signals fewer rate cuts in 2025

Gold price extended its corrective decline from five-week highs of $2,726 and hit the lowest level in a month near $2,580 before rebounding toward $2,600, where it now wavers.

The primary reason behind the Gold price downside is the Fed’s cautious outlook on interest rate cuts in the face of US President-elect Donald Trump’s protectionist world, which is likely to be inflationary.

The US central bank lowered policy rate by 25 basis points (bps) to 4.25%-4.50% range, as widely expected. However, the Fed’s Statement of Economic Projections (SEP), the so-called Dot plot chart, forecast two quarter-percentage-point rate reductions by the end of 2025. That is half a percentage point less in policy easing next year than officials anticipated as of September.

The Fed policymakers project inflation jumping to 2.5% from 2.1% in their prior projections for the first year under the new Trump administration.

The hawkish Fed shift triggered a sharp rally in the US Treasury bond yields, which drove the US Dollar (USD) to over two-year highs against its major rivals. The US Dollar Index (DXY) surged to 108.27, its highest since November 2022.

Looking ahead, traders will react to the Fed’s hawkish cut outcome while awaiting the policy verdicts from the Bank of Japan (BoJ) and the Bank of England (BoE). Both central banks are expected to stand pat on interest rates, but their outlooks on the policy course next year will hold the key to market sentiment.

The US Dollar could take the lead from the USD/JPY price action following the BoJ policy announcements, impacting the USD-sensitive Gold price. However, any move is likely to be temporary, as the focus will remain on the latest Fed projections.

Gold traders will also look forward to the US data releases, including the third-quarter growth revision, Jobless Claims and Existing Home Sales data, for fresh trading impetus ahead of Friday’s US November PCE inflation report.

Gold price technical analysis: Daily chart

The daily chart shows that Gold price is testing the key 100-day Simple Moving Average (SMA) at $2,605 on its tepid recovery attempt early Thursday.

Recapturing that level on a daily closing basis is critical to unleashing additional recovery.

The next topside barrier is at the December 17 low of $2,633, followed by the 21-day Simple Moving Average (SMA) of $2,650.

The 14-day Relative Strength Index (RSI) has ticked up but remains below the 50 level, suggesting that Gold price remains a good selling opportunity on rebounds.

If the turnaround fizzles out, Gold sellers will again challenge the monthly low of $2,583.

The November 15 and 14 lows at $2,555 and $2,537, respectively, could come into play.

Signs Correction Complete

The recent retracement low on December 4 was at 2.98. That decline completed a 61.8% Fibonacci retracement at 3.02 and returned to the breakout area of a large symmetrical triangle pattern. This is classic bullish behavior as a prior resistance zone was successfully tested as support and an advance followed. The 20-Day MA (purple) has done a good job of marking dynamic support for the uptrend since it was reclaimed on October 29.

Recently, it was tested as support on multiple days, including yesterday. Although natural gas fell through the 20-Day line on six days recently, beginning with the December 4 low, it managed to close above the line each day. So, there was a fast recovery, which points to underlying demand.

Strong Momentum Needed for Breakout

There is the potential for a continuation to new trend highs, but the attempt to break out to new trend highs was cut short last week as resistance was seen around 3.56. That is where resistance was seen following the initial bull breakout on November 20. Tuesday’s reversal day showed strength that now needs further follow-through. Momentum will need to be strong enough during this rally to break through 3.56. Otherwise, natural gas could consolidate a bit before it is ready to attempt a trend continuation breakout.

Near-Term Support at 3.09 Needs to Hold

On the downside, a drop through Tuesday’s low of 3.09 could lead to a retest of the 2.98 price zone and a decline below it. Also, a daily close below the 20-Day MA would be one sign of weakness. It is interesting to note that the rising 50-Day MA (orange), now at 2.88, is close to converging with the top trendline across the top of the triangle and it will likely be above in the coming days. That would improve the chance that support would be seen at or above the 50-Day line if a deeper correction develops.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,637.81

• Federal Reserve expected to trim benchmark rate by 25 bps, offer a glance into 2025.
• The US Dollar holds near its recent weekly highs against most major rivals.
• XAU/USD is technically bearish in the near term, aims to pierce the weekly low at $2,633.

Speculative interest holds its breath on Wednesday, resulting in little action across the FX board. Investors await the Federal Reserve’s (Fed) monetary policy announcement as the central bank ends its two-day meeting. United States (US) policymakers are expected to cut the main interest rate by 25 basis points (bps) and share their views on key macroeconomic indicators and the future of monetary policy through the Summary of Economic Projections (SEP) or dot-plot.

Finally, Chairman Jerome Powell will offer a press conference. Market players will be looking for clues on upcoming decisions, while Powell will do as usual and pour cold water on any speculation that can disrupt the market’s behaviour.

Generally speaking, the US Dollar (USD) is strong across the FX board, trading near its weekly highs against most major rivals. The basic idea of the market reaction following the aforementioned events is whether the outcome is dovish or hawkish. A hawkish central bank tends to translate into a stronger local currency, while the opposite scenario is also valid, with a dovish stance resulting in a weaker currency. Things, however, are never that straightforward.

The Fed is expected to cut rates (dovish) while delivering a hawkish message. The hawkish cut is priced in, and the market will react to 2025 expectations.

XAU/USD short-term technical outlook

Technically,  the daily chart for the XAU/USD pair shows the pair is down for a second consecutive day, although it is holding above the weekly low set at $2,633. In the same chart, a flat 20 Simple Moving Average (SMA) provides dynamic resistance at around $2,655. The 100 and 200 SMAs keep heading higher, well below the current level, limiting the long-term bearish potential. Finally, technical indicators are neutral-to-bearish, developing around their midlines and failing to provide clear directional clues.

The 4-hour chart shows that the risk skews to the downside. The XAU/USD pair trades below all its moving averages, while the 20 SMA is heading firmly lower after crossing below directionless 100 and 200 SMAs. At the same time, technical indicators gain downward traction within negative levels, supporting a fresh leg lower beyond the $2,633 weekly low.

 Support levels: 2,633.00 2,617.90 2,603.15

Resistance levels: 2,643.40 2,657.30, 2,672.70