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Wednesday 16 March 2022

China posted a steep jump in daily COVID-19 infections doubling

US stock markets: Major U.S stock indexes closed mostly lower in yesterday’s session, led by a more than 2% drop in NASDAQ, as investors sold tech and big growth names ahead of this week's Federal Reserve meeting and an expected hike in interest rates. 

The Dow ended flat, with financial and healthcare shares giving the index some support. Developments in the Ukraine-Russia conflict added to investor caution as Russian and Ukrainian delegations held the fourth round of talks yesterday, but no progress was announced, while Russian forces allowed the first convoy of cars to escape Ukraine's besieged port of Mariupol. 

Economic Calendar

Apple Inc. shares fell 2.7% and weighed the most on the S&P 500 and NASDAQ after its supplier Hon Hai Precision Industry Co Ltd, known as Foxconn, suspended operations in China's Shenzhen amid rising COVID-19 cases. The Fed is expected to raise interest rates for the first time in three years Wednesday in an effort to combat rising inflation.

Dow Jones Industrial Average

The Dow Jones Industrial Average ended almost unchanged. The biggest gainers of the session on the Dow Jones Industrial Average were American Express Company, which rose 2.91% or 4.89 points to trade at 172.79 at the close. The Travelers Companies Inc. added 1.99% or 3.45 points to end at 177.18 and Coca-Cola Co was up 1.84% or 1.06 points to 58.54 in late trade. The biggest losers included Nike Inc., which lost 4.13% or 5.06 points to trade at 117.57 in late trade. Intel Corporation declined 3.12% or 1.43 points to end at 44.40 and Apple Inc. shed 2.66% or 4.11 points to 150.62.

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NASDAQ 100

The NASDAQ index declined 2.04%. The top performers on the NASDAQ Composite were Incannex Healthcare Ltd ADR which rose 61.72% to 22.90, Red Cat Holdings Inc. which was up 48.37% to settle at 2.73 and Q And K International Group Ltd which gained 37.56% to close at 1.69. The worst performers were Nektar Therapeutics which was down 60.87% to 4.16 in late trade, Kingsoft Cloud Holdings Ltd which lost 47.86% to settle at 2.56 and Electric Last Mile Solutions Inc. which was down 47.71% to 0.99 at the close.

Oil price - Crude Oil market, Brent Oil market

Oil prices extended losses, sliding to a two-week low as ceasefire talks between Russia and Ukraine eased fears of further supply disruptions, and surging COVID-19 cases in China fueled concerns about slower demand. 

U.S crude fell below the $100 level for the first time since March 1, dropping $5.49 or 5.3%. It fell to as low as $96.70 earlier in the session. Expectations of positive developments in the Russia-Ukraine ceasefire talks bolstered hopes to ease tightness in the global crude market. 

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Fresh lockdowns to curb the COVID-19 pandemic in China also raised concerns over slower demand. China posted a steep jump in daily COVID-19 infections on Tuesday, with new cases more than doubling from a day earlier to hit a two-year high, raising concerns about the rising economic costs of the country's tough containment measures. 

Further talks between Ukrainian and Russian negotiators to ease the crisis were expected after discussions via video ended with no new progress announced.

Precious and Base Metals - Gold price, Silver price, Palladium price

Gold prices fell today to their lowest in more than a week, as U.S. Treasury yields surged ahead of an expected rate hike from the Federal Reserve, and as hopes for progress in Russia-Ukraine talks further dampened the metal's safe-haven appeal. Spot gold was down 0.4% at $1,942.96 per ounce, after touching its lowest since March 4 at $1,940 earlier in the session. U.S gold futures fell 0.5% to $1,951.20. 

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U.S. Treasury yields jumped to two-and-a-half-year highs on Monday, ahead of what is expected to be the Fed's first rate hike in three years on Wednesday to try to tame soaring inflation that shows no signs of slowing. 

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. Russian and Ukrainian delegations held the fourth round of talks on Monday - by video link rather than in person - but no new progress was announced. Discussions were due to resume on Tuesday. 

Palladium, used by automakers in catalytic converters to curb emissions, fell 1% to $2,363.06 per ounce, after declining more than 15% in the previous session on easing supply fears. Russian mining giant Nornickel's biggest shareholder told Russian RBC TV on Saturday that the group had managed to secure alternative routes for its palladium deliveries even as it faced logistical constraints. 

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A market authority said last week that Russian refiners can continue to sell platinum and palladium in London, the world's biggest precious metals trading center. The auto-catalyst metal hit a record high of $3,440.76 last week, driven by fears of supply disruptions from top producer Russia. Spot silver shed 0.4% to $24.92 per ounce, while platinum was down 0.1% to $1,029.16.

Traditional Agricultures - Corn futures, Wheat futures,  Soybean futures

Corn fell pressured by uncertainty in the Black Sea region as talks of a ceasefire in Ukraine could open up the region to exports, though progress remains uncertain. Wheat eased earlier but returned to near even on news that Russia is suspending exports to protect domestic food supplies as tariffs damage its economy. Soybeans were initially supported by Argentina’s decision to halt exports registration of soy oil which could increase oilseed demand in other countries to produce alternative supplies.

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All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner's prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

Tuesday 15 March 2022

The fundamentals of the euro area economy are strong EUR/USD

  • The yen remained under pressure today in the Asian trading session and the euro edged higher
  • The U.S. Federal Reserve is set to raise rates for the first time since the pandemic
  • Markets anticipate a 25 basis point rise at this meeting, according to the CME's Fed watch tool
  • Russian and Ukrainian delegations held the fourth round of talks but no new progress was announced

The yen remained under pressure on Tuesday and the euro edged higher as talks between Russian and Ukrainian negotiators continued, but moves were more muted than in recent days as the market's attention turned to this week's Fed meeting.

The U.S. Federal Reserve is set to raise rates for the first time since the pandemic at its meeting which concludes Wednesday, with traders looking for indications about the pace of future rate hikes. Markets anticipate a 25 basis point rise at this meeting, according to the CME's Fed watch tool, but pricing has risen to indicate a 70% chance of a larger 50 basis point hike at its subsequent meeting in May, due to concerns about inflation. 

Economic Calendar

We think the statement and Chair Powell's press conference after the meeting will be influential in terms of market pricing for a 50 basis point rise in May and beyond, and that will impact the U.S dollar intraday. The dollar index, which measures the greenback against six major peers was at 98.881, down 0.23% on the day mainly due to losses against the euro, but still in sight of the 99.415 touched a week ago, its highest level since May 2020. 

The yen fell as low as 118.44 per dollar on Tuesday, a new five-year low, as its recent slide showed no signs of stopping. The contrast between rising benchmark rates in the United States and low rates in Japan is becoming ever more apparent as the Fed begins to tighten, particularly with both the Fed and the Bank of Japan meeting this week. 

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Analysts at Bank of America raised their forecast for the dollar-yen to 123 by the third quarter of this year. The return of risk sentiment to markets, partly on the back of hints of a negotiated end to the war in Ukraine, has also taken away some of the support for the safe-haven Japanese currency. Russian and Ukrainian delegations held the fourth round of talks but no new progress was announced.

Euro

The single currency gained as Eurozone finance ministers agreed to tighten fiscal policy next year after pumping billions into the economy due to the coronavirus pandemic, but also to be ready with more cash should the war in Ukraine make it necessary. "The fundamentals of the euro area economy are strong," the ministers from the Euro Zone said. Overall, the EUR/USD traded with a low of 1.0884 and a high of 1.0665 before closing the day around 1.0934 in the New York session.

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Yen

The Japanese Yen remained under pressure and the euro edged higher as talks between Russian and Ukrainian negotiators continued, but moves were more muted than in recent days as the market's attention turned to this week's Fed meeting. The U.S Fed is set to raise rates for the first time since the pandemic at its meeting which concludes Wednesday. Overall, the USD/JPY traded with a low of 114.63 and a high of 115.53 before closing the day around 114.83 in the U.S session.

British Pound

The British Pound eked out gains against the U.S dollar yesterday, recovering after falling to a 16-month low, as tentative hopes for progress in talks between Russia and Ukraine dampened demand for U.S currency and other safe assets. The market was also looking to policy announcements from the Bank of England and the U.S Federal Reserve later this week. Overall, the GBP/USD traded with a low of 1.3200 and a high of 1.3353 before closing the day at 1.3238 in the New York session.

Canadian Dollar

The Canadian Dollar weakened against its U.S counterpart yesterday as signs of progress in peace talks between Russia and Ukraine reduced investor worries that commodity supplies will be in short supply. Canada is a major producer of commodities, including oil. It is primarily a macro story as markets are repricing the Russian premium. Overall, USD/CAD traded with a low of 1.2667 and a high of 1.2789 before closing the day at 1.2735 in the New York session.

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Australian Dollar

The Australian Dollar slipped yesterday as hints of progress in Russian-Ukraine talks saw global commodity prices come off the boil, while the U.S dollar looked forward to the start of an extended cycle of rate hikes this week. The Aussie fared better on the yen as the Bank of Japan is keeping bond yields near zero and high resource prices are weakening Japan's trade account. Overall, AUD/USD traded with a low of 0.7138 and a high of 0.7235 before closing the day at 0.7231 in the New York session.

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 40 and lies below the neutral zone. In general, the pair has lost 1.70%.

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 42 reading and lies below the neutral zone. On the whole, the pair has lost 1.35%.

Aussie-Yen

Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 54 reading and lies above the neutral region. In general, the pair has gained 0.06%.

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Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 46 and lies below the neutral region. Overall, the pair has lost 0.35%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has lost 0.86%.

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All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner's prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

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Trade Zone Week Ahead with Boris Schlossberg

Boris Schlossberg is back once again to give his take on the Trading Week Ahead this week. It's a big week for the US Fed this week, as it meets to push through its first increase in interest rates since the pandemic, against an increasingly volatile situation in Ukraine. Last week, the markets witnessed parabolic moves for both oil and gold as risk-off sentiment increased, however, those moves didn't last long and soon reversed Gold and Oil to the Nasdaq and Bitcoin.

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The markets seems to be pricing in on the FOMC meeting

US stock markets: Major U.S stock indexes tumbled on Friday as tech and growth shares led a broad decline and investors worried about the conflict in Ukraine while attention turned to the Federal Reserve's policy meeting next week. 

The Dow Jones Industrial Average fell 229.88 points or 0.69%, the S&P 500 lost 55.21 points or 1.30% and the NASDAQ dropped 286.15 points or 2.18%. Notably, a key measure of U.S. inflation expectations climbed to 3% and near-record highs. That merely cemented expectations the Federal Reserve would lift rates by 25 basis points at its policy meeting this week and signal more to come through members' "dot plot" forecasts.

Economic Calendar

The dots will likely be mainly clustered around four or five hikes for 2022, up from three previously, given the stronger pace of inflation since the January FOMC meeting. We suspect we could also get an addendum on how the Fed plans to reduce the size of the balance sheet as early as this week.

Dow Jones Industrial Average

The Dow Jones Industrial Average declined 0.69%. The biggest gainers of the session on the Dow Jones Industrial Average were McDonald’s Corporation, which rose 2.19% or 4.87 points to trade at 226.87 at the close. Caterpillar Inc. added 1.44% or 3.04 points to end at 214.83 and The Travelers Companies Inc. was up 1.07% or 1.84 points to 173.73 in late trade. The biggest losers included Nike Inc., which lost 2.70% or 3.40 points to trade at 122.63 in late trade. Apple Inc. declined 2.39% or 3.79 points to end at 154.73 and JPMorgan Chase & Co shed 2.25% or 2.97 points to 128.89.

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NASDAQ 100

The NASDAQ index lost 2.18%. The top performers on the NASDAQ Composite were Terawulf Inc. which rose 49.29% to 9.51, Guardforce AI Co Ltd which was up 45.04% to settle at 0.78 and Clearside Biomedical Inc. which gained 42.59% to close at 1.92. The worst performers were Orphazyme which was down 45.75% to 0.68 in late trade, Zhongchao Inc. which lost 38.24% to settle at 1.05 and Exela Technologies Inc. which was down 32.68% to 0.57 at the close.

Oil price - Crude Oil market, Brent Oil market

Oil prices shed as much as $4 a barrel today, extending last week's decline as diplomatic efforts to end the war in Ukraine geared up and markets braced for higher U.S interest rates. U.S West Texas Intermediate (WTI) crude futures eased $3.85 or 3.5% to $105.48 a barrel. 

Ukrainian and Russian negotiators are set to talk again via video link after both sides cited progress. Negotiators had given their most upbeat assessments after weekend negotiations, suggesting there could be positive results within days. 

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Oil prices might continue moderating this week as investors have been digesting the impact of sanctions on Russia, along with parties showing signs of negotiation towards ceasing fire. As markets had priced in for a much tighter supply from February to early March, the focus is shifting to the monetary policy in the upcoming FOMC meeting this week, which could strengthen the USD further, and pressure on commodity prices. 

The U.S Federal Open Market Committee meets on March 15-16 to decide whether or not to raise interest rates.

Precious and Base Metals - Gold price, Silver price, Palladium price

Gold prices fell today as U.S rate-hike expectations lifted Treasury yields to their highest in a month, while hopes for progress in Russia-Ukraine peace talks improved risk appetite, denting bullion's appeal. 

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. Higher rates, aimed at curbing inflation, also dent gold's appeal as an inflation hedge. Spot gold was down 0.5% at $1,975.90 per ounce. U.S gold futures shed 0.3% to $1,979.90. One key reason is surging Treasury yields.

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Also market seems to be pricing in on the FOMC (Federal Open Market Committee) meeting on Wednesday at which the U.S. Federal Reserve may start to kick off the tightening cycle. So, this is a negative factor for gold. Benchmark U.S. 10-year Treasury yields rose to a near one-month high as the U.S. Federal Reserve is widely expected to raise interest rates by a quarter of a percentage point at a two-day event later this week. 

Our expectations are, barring any unforeseen events in the current Russia-Ukraine conflict, for the gold price to settle towards $1,900/oz over the following weeks. Global shares gained as diplomatic efforts to end the war in Ukraine were stepping up on Monday, with Ukrainian and Russian negotiators set to talk again after both sides cited progress.

Palladium, used by automakers in catalytic converters to curb emissions, dipped 4.5% to $2,688.93 per ounce. The metal hit a record high of $3,440.76 last week, driven by fears of supply disruptions from top producer Russia. Russian mining giant Nornickel is facing significant logistics issues but has managed to secure alternative routes for its palladium deliveries. Among other metals, spot silver shed 0.6% to $25.64 per ounce, while platinum dropped 2.4% to $1,053.92.

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Traditional Agricultures - Corn futures, Wheat futures,  Soybean futures

Wheat and corn futures fell today on hopes supply from the Black Sea region could normalize as Russian and Ukrainian officials gave their most upbeat assessments yet of progress in their talks following Moscow's invasion of its neighbor. Soybean futures rose on Argentina's decision to halt exports registration of soy products, which could tighten the oilseed supplies already squeezed by drought.

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All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner's prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

Monday 14 March 2022

Volatility in commodity prices and threatening global economic growth

  • The dollar rose on Friday, notching a five-year high against the safe-haven yen
  • Russian President said there had been some progress in talks between Moscow and Ukraine
  • Russia's Feb. 24 invasion of Ukraine, which Moscow calls a "special operation," has roiled markets

The dollar rose on Friday, notching a five-year high against the safe-haven yen, while commodity-linked currencies slumped after Russian President Vladimir Putin said there had been some progress in talks between Moscow and Ukraine. 

Putin said in a meeting with his Belarusian counterpart Alexander Lukashenko that there had been "certain positive shifts" in negotiations with Ukraine and that talks continued practically on a daily basis. Russia's Feb. 24 invasion of Ukraine, which Moscow calls a "special operation," has roiled markets, causing volatility in commodity prices and threatening global economic growth prospects. 

The dollar initially declined on the news, but then gradually firmed and was last up 0.76% against a basket of six global peers at 99.11. The index was on track for a 0.56% increase for the week, following last week's 2% rise, which was its largest weekly percentage gain since April 2020. The greenback hit a five-year high against the Japanese yen, which was down 1.03% at 117.32 yen.

Economic Calendar

When people are taking a look at which economies are poised to handle the widespread inflationary pressures, the U.S. economy is looking like it's going to be the outperformer and that's why you're seeing the dollar do well against the yen in these risk-averse times. The dollar has also been supported by expectations that the Federal Reserve will start raising interest rates at the end of its March 15-16 policy meeting, with inflation running hot. 

While the U.S. central bank is all but certain to hike rates from the COVID-19 pandemic low, the Bank of Japan, which also holds a policy meeting next week, is set to remain an outlier. The euro slid 0.69% against the dollar to $1.0912, erasing gains from the overnight session and putting it on track to end the week slightly lower for what would be its sixth-straight weekly loss. The single currency has fallen more than 2.5% against the U.S. dollar in March. 

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After hitting a nearly two-year low on Monday amid growing stagflation worries arising from the Ukraine war, the euro received some support from the European Central Bank's announcement that it will phase out its stimulus, opening the door to an interest rate hike before the end of 2022. 

Commodity-linked currencies, including the Australian dollar and the New Zealand dollar, were lower versus the greenback, with the Aussie and the kiwi both down 0.8%. Currencies that had been gainers because of the commodity chaos are starting to come down a little bit.

Euro

The single currency traded lower in Friday’s trading session. Eurozone finance ministers are likely to endorse later in today's session the European Commission's view that fiscal policy should move from supportive to neutral in 2023, but that they must be ready with more cash should the war in Ukraine make it necessary. Overall, the EUR/USD traded with a low of 1.0900 and a high of 1.1041 before closing the day around 1.0909 in the New York session.

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Yen

The Japanese Yen fell to a new 5 year low. The dollar initially declined on the news, but then gradually firmed and was last up 0.76% against a basket of six global peers at 99.11. The index was on track for a 0.56% increase for the week, following last week's 2% rise, which was its largest weekly percentage gain since April 2020.. Overall, the USD/JPY traded with a low of 116.10 and a high of 117.34 before closing the day around 117.25 in the U.S session.

British Pound

The British Pound slipped to a 16-month low on Friday against the safe-haven U.S dollar and was heading for its third consecutive weekly decline as stronger-than-expected UK economic growth did little to support the pound. The Office for National Statistics said Britain’s economy grew 0.8% in January, the strongest monthly expansion since June. Overall, the GBP/USD traded with a low of 1.3025 and a high of 1.3123 before closing the day at 1.3032 in the New York session.

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Canadian Dollar

The Canadian Dollar strengthened against its broadly stronger U.S counterpart on Friday as domestic data showed a blockbuster jobs gain in February, helping to underpin expectations for another Bank of Canada interest rate hike next month. Canada added 336,600 jobs in February, more than double the 160,000 analysts had forecast. Overall, USD/CAD traded with a low of 1.2691 and a high of 1.2791 before closing the day at 1.2744 in the New York session.

Australian Dollar

The Australian Dollar slipped today in the Asian trading session as hints of progress in Russian-Ukraine talks saw global commodity prices come off the boil, while the U.S dollar looked forward to the start of an extended cycle of rate hikes this week. Futures continue to price in a first hike of the 0.1% cash rate by June, or July at the latest. Overall, AUD/USD traded with a low of 0.7138 and a high of 0.7235 before closing the day at 0.7231 in the New York session.

Trading Signals and Trading Forecasts

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 40 and lies below the neutral zone. In general, the pair has gained 0.27%.

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 42 reading and lies below the neutral zone. On the whole, the pair has gained 0.58%.

Aussie-Yen

Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 54 reading and lies above the neutral region. In general, the pair has gained 0.05%.

Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 46 and lies below the neutral region. Overall, the pair has lost 0.28%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has gained 0.17%.

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All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner's prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.