Greenback on the rise once again

The USD continued its surge upwards on Thursday with the Dollar Index moving to a new 2021 high. The most significant among the major currency pairs was USD/CAD that was lifted to a 6 month high. On the contrary USD/JPY was the only major pair to finish Thursday with the greenback losing ground. US major stock markets finished the day in green territory even though they opened with a negative gap. Gold continued its rather muted reaction moving in a sideways range for the past days, while WTI prices stabilized nearby $63.50.

Natural Gas prices in focus

News over Natural Gas supply has been in the epicentre of the markets attention through various reports in the past days. The Nord Stream 2 pipeline, which is nearing its completion will be used by Russia to supply the European block, and is expected to deliver 5.6 billion cubic meters (bcm) this year, according to gas producer Gazprom. Higher demand for the block’s needs and lower supply due to high temperatures may have kept prices higher. Also, a turn to cleaner sources of energy seems to keep demand on the rise. In the beginning of August Nat Gas prices reached a new 2021 high level. Other large global importers of Nat Gas like Japan and China seem to have increased their imports recently which is even stronger evidence of higher demand. Despite the rise to higher price levels in the start of August the price action has now returned lower yet remains in an upward trend line in our opinion.

Technically, Nat Gas has moved lower in consecutive session since the high it reached in early August. The downward trend line formed in August is highlighted with a yellow descending line on our chart. In the past sessions, Nat Gas has tested the (S1) 3.750 support but bounced off it thereafter. Other support levels we have noted to the downside are the (S2) 3.570 line which was tested back in June and July. Even lower the (S3) 3.350 level is the lowest support noted in our opinion. Yet with the latest resurgence higher Nat Gas could be heading to the (R1) 4.000 resistance. If the level is breached then traders could be aiming for the (R2) 4.2000 level which is also the 2021 high. On the chart we are also seeing the 200 moving average lower than the 100 moving average but are seemingly getting closed possibly implying that some stabilization could take place.  In this case the (S1) 3.750 support and the (R1) 4.000 resistance could be used as barometers for future price action.

Palladium prices drop to 5 month low

Palladium prices (XPD/USD) have in the past days dropped to levels previously seen in March. This is the strongest selling month so far for the precious metal in 2021.

Even though XPD/USD was in an upward trend line since the start of 2018, the trend could now be technically breaking as fundamentals around the world do not seem to favour its market.  According to Bloomberg nearby 85% of global supply of the Palladium is used in pollution-reducing catalytic converters in gasoline engines. Yet at the moment platinum seems to make more sense for automakers due to the fact that it’s cheaper and could reduce overall costs. Another reason is that the trend at the moment is turning towards electrical vehicles which can also reduce demand for Palladium significantly in the near future.

In the past the Palladium market had also faced supply deficit matters with the larger miners in the world (Russian Norilsk Nickel) not been able to deliver. Technically, Palladium has dropped for the past four consecutive days forming a rather steep downward trend line highlighted with a black line on our chart. The RSI indicator has remained below 30 for the past days confirming the oversold position Palladium is in. Levels we have noted if the trend continues to the downside are the (S1) 2252.45 and even lower the (S2) 2180.50. In the opposite direction we could see a resurgence towards the (R1) 2328.55 or even higher the (R2) 2388.15 level.

Other economic highlights today and the following Asian session:

Today during the European session we get Germany’s Producer Prices for July, the UK Retails sales rates for July and the Norwegian GDP rates for Q2 and June. Later in the US session we get the Canadian Retail Sales for June. In the Asian session on Friday we get the Preliminary Australian and Japanese PMI readings for August.

Nat Gas H4 Chart 

Support: 3.750 (S1), 3.570 (S2), 3.350 (S3)

Resistance: 4.000 (R1), 4.200 (R2), 4.470 (R3)

XPD/USD H4 Chart 

Support: 2252.45 (S1), 2180.50 (S2), 2118.80 (S3)

Resistance: 2328.55 (R1), 2388.15 (R2), 2447.80 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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