• Palladium is bullish in near term
• $721 and $743 are two major resistance levels
• Dollar climbed after mixed economic reports
Palladium prices continued an upside movement on Thursday after mixed US data. Palladium prices are likely to revisit $750 an ounce in the near future, according to technical analysis.
The spot metal is being traded at $711 an ounce in the US opening session with immediate support seen around $700, which is the psychological level and the 76.4% fib level; ahead of $695 i.e. swing low of the current wave. A break and daily close below the $695-$700 handle may expose $690, which is the swing low of the previous wave. Bias shall remain bullish as far as Palladium price continues to trade above $690.
On the upside, resistance can be noted around $712, the 61.8% fib level, ahead of $721 that is the 50% fib level and a confluence zone of 55, 100 & 200 Daily Moving Average (DMAs). A small correction is expected from $721; however Palladium shall ultimately break and settle above $721 to target $743 i.e. the 23% fib level and then the $250 handle, the swing high of the previous wave.
Commodity Channel Index (CCI) is showing -47 reading after hitting an extreme oversold level around -246 at daily chart, a read below -100 signals oversold sentiment. Relative Strength Index (RSI) is giving a 43 read, which is considered a neutral signal. It is retreating from oversold territory on the daily chart. A slight positive divergence may also be noted with MACD at daily timeframe which shows bulls might take control in the near future.
Moments ago, a report by the US Labor Department showed a fall in jobless claims, for the first time in around three months, as employers retained staff to fulfill demand, yet another sign of recovery in the United States. The number of people who applied for unemployment benefits declined by 20,000 to 331,000. Analysts had predicted a decrease to 335,000, hence the report topped expectations. The Dollar climbed after this report was released. Consequently, Palladium prices came under pressure.
Meanwhile, the US trade balance report for December posted a downbeat reading of minus $38.70 billion, with analysts expecting a $36 billion deficit. Tomorrow, Friday, February 7, the Labor Department will release two important reports about non-farm payrolls and the unemployment rate for January. A positive outcome may prompt Fed policymakers to exercise another tapering in its monthly asset purchase program on next policy meeting.
It is pertinent to mention that the demand of Palladium exceeded the supply by 740,000 ounces last year and the deficit is expected to widen during the course of the current year. According to Citigroup estimate, around 1.139 million ounce deficit is likely in 2014. Thus, long term bias shall remain bullish due to supply concerns about the white metal. However, we may see a reduction in Palladium demand from China, which is the biggest consumer of the metal, because the Asian nation grew last year at the slowest pace since 1999 and manufacturing activity also slid down in world’s second largest economy during last month.
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