Analys från DailyFX
Gold Prices Move Up $50 from the Lows: Short-Squeeze or Start of Something More?
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- Gold Technical Strategy: Intermediate-term (past 3 months) bearish, short-term (past month) bullish
- After dropping by more than $200 in the six weeks after the election, Gold prices are up over $50 in the past three weeks.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the extreme bearishness that drove Gold prices lower by more than $200 in the six weeks after the Presidential election. As we warned, price action in Gold was looking considerably oversold, and given a fresh ‘higher low,’ traders looking to take part in the bearish move would likely want to wait before chasing the setup. Since that article, Gold prices have moved up by more than $50, breaking multiple points of resistance along the way; and now on a short-term chart Gold prices are looking downright bullish.
Chart prepared by James Stanley
To traders watching only short-term charts, this could be attractive for bullish trend-strategies. However, by scrolling out a bit, we’ll notice that, at least at this point, this move has been but a drop in the bucket of the bigger picture bearish move. On the daily chart shown below, we can see how this recent run has only retraced 23.6% of the post-election bearish move.
Chart prepared by James Stanley
Given the context of the two above observations, traders would likely want to continue to classify Gold as bearish but in a current state of consolidation or retracement. After Gold prices had become so incredibly oversold in the month of December, a 23.6% retracement of that move could easily be classified as short-covering that’s squeezing other shorts as prices move-higher.
As we had written in our last article, traders can use the level at $1,188.10 to invalidate the bearish move in order to begin investigating bullish strategies; with secondary invalidation at the vaulted psychological figure at $1,200. Traders looking to trade with the bearish move will likely want to wait for short-term support to give way to provide the indication that sellers may be able to re-take control. The price action swing at $1,160.50 could be used for such a purpose, followed by the Fibonacci level at $1150.72.
— Written by James Stanley, Strategist for DailyFX.com
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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