PLATINUM TODAY: Expect prices to pop after the next Fed move

Short Term: Medium Term: Long Term: Resistances: R1 947 20 DMA R2 1,046 2017 peak R3 1,141 DTL from 2012 high R4 1,184 2016 high (Jul) R5 1,290 DTL from 2008 high Support: 200 1,008 50 987 20 947 Support: S1 958 61.8% Fibo S2 893 78.6% Fibo S3 811 2016 low S4 745 2008 low Stochastics: Legend: DMA – daily moving average DTL – downtrend line Fibo – Fibonacci retracement level The momentum index allows us to determine whether momentum is positive (>0) or negative (<0). We use a parameter equal to 10, corresponding to momentum over the past 10 days. ADX – average directional index; this allows us to gauge the strength of the current trend (above 20, the trend is strong; below 20, the trend is weak) The combination of momentum and ADX allows us to determine the current trend (up or down) and its strength (strong or weak). RSI – relative strength index; used to detect whether a metal is oversold (RSI below 30) or overbought (RSI above 70)   Technical Comment Momentum is negative while the ADX is above 20, indicative of a strong downtrend in motion. Analysis Note: we are using 5*charts today because our ChartStation is experiencing some technical issues. Platinum has broken below key support levels such as its 20 DMA, the 50% Fibo of the 2016 uptrend and the 200 DMA so perhaps the current downtrend is set to continue for longer. The break below the 20 DMA has turned us neutral over the very short term. Longer-term view: as our monthly chart shows, platinum is fighting with its 20 MMA at $974 per oz. A break below it by the end of March could suggest that sentiment is turning negative again, which in turn would trigger further selling pressure. On the upside, we see the next key resistance at the 38.2% Fibo. On the downside, we will closely watch the 20 DMA to gauge sentiment. Macro drivers Platinum is up 0.4% at the start of the week amid limited upward pressure across the precious metals ahead of the Fed’s rate decision on March 15. Last week, platinum was the worst performer in the complex, tumbling 5.6%, on hefty speculative selling (see below). This week will be busy in terms of macro and political events. First, China is due to release key macro data tomorrow, which will help investors better assess the current rebound in Chinese economic growth. Second, the Fed is due to decide whether or not to raise rates on Wednesday. Finally, the Netherlands will hold parliamentary elections on the same day. Those events may trigger some risk-off across financial markets, especially given that investors have been deeply complacent in recent weeks, using an elevated level of leverage to benefit from the low-volatility environment. Safe-haven demand could therefore grow, pushing platinum higher. There is a key downside risk to platinum this year, namely weakening autocatalyst demand due to weaker Chinese auto sales triggered by the tax incentive rollback. But according to recent data, auto sales surprised to the upside in the first two months of the year, up 8.8% from a year ago According to the China Passenger Car Assn, China passenger car sales dropped 9.8% in January from a year ago. But some caution is warranted: the numbers for January and February are often distorted by seasonality. Investment/speculative flows: ETF holdings – at 2.388 million oz as of March 10 – rose about 5,500 oz last week after increasing about 12,000 oz in the preceding week, which suggests some buying on the dips. Net long speculative positioning deteriorated significantly over February 28-March 7, the latest CFTC statistics show. Still, we will stick with our view that spec positioning will improve in the days/weeks ahead from stronger safe-haven buying interest against an uncertain macro/political backdrop. Supply/demand balance: The WPIC revised its forecasts in March. It expects the global platinum market to be in a deficit of 120,000 oz (upwardly revised from its previously projected deficit of 100,000 oz). So 2017 should be the sixth consecutive year of deficit. The WPIC estimates that the global platinum market was in deficit of 270,000 oz in 2016 (above the WPIC’s expectations of 170,000 oz). Conclusion We turned neutral on platinum prices over the very short term on March 2 at $991 per oz following the break below the 20 DMA. We initially adopted a positive stance on platinum at $958 per oz early in January. While we stay on the sidelines due to a negative technical picture, prices might rebound after the Fed meeting as was the case after its rate increase in December 2016. Over the short term (1-3 months), we are slightly bullish – we think the metal will perform well in absolute terms and ultimately outperform palladium once the risk rally ends. For more information on our forecasts, please see our January spotlight.  All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

The post PLATINUM TODAY: Expect prices to pop after the next Fed move appeared first on The Bullion Desk.

from The Bullion Desk http://ift.tt/2nfmeSy
via IFTTT