Analys från DailyFX
Gold Prices at Pivotal Support Ahead of the Fed
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- Gold Technical Strategy: Near-term: Aggressively bearish, but finding support around $1,200.00.
- Gold prices have been aggressively bearish for most of March as U.S. rate hike odds have moved-higher.
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In our last article, we looked at the aggressively-bearish move in Gold prices that hit the yellow metal by more than $55 in a little over a week. The driver here was fairly-clear, as we saw expectations for a rate hike at the Federal Reserve’s March meeting shooting-higher after a chorus of Fed-speakers gave a series of hawkish comments that finally convinced markets that rate hikes were coming sooner-rather-than-later. This has produced a considerable hit to Gold prices with a major long-term level of support now coming into-play at the $1,200-area. This is the 38.2% Fibonacci retracement of the ‘big picture’ move in Gold prices, taking the Bretton Woods-fix of $35/oz all the way up to the 2011 high at $1,920.
Chart prepared by James Stanley
With support showing-up around this key level, we may be seeing the rate hike that’s largely-expected to take place later today being priced-in. So, the determinant to that next directional move in Gold prices is likely going to come from how hawkish or dovish the Fed might be with forward-looking rate expectations. Given that the Fed is using today’s meeting to roll-out ‘fan charts,’ which gives the bank a bit more flexibility in how they’re going to communicate those expectations to markets, with a ‘range’ of values being offered as opposed to a rigid, singular number.
The Fibonacci retracement drawn-around the most recent bullish move could be helpful for determining the next directional bias in Gold as we near this pivotal rate decision from the Fed. By taking the low set just after the Fed’s rate hike in December up to the high set in latter-February, and we can get a series of levels to work with. This is shown below with the royal blue Fibonacci retracement, and if price action is able to break-below the 50% marker of this move, bearish positions could be sought with traders attempting to sell ‘lower-high’ resistance. Conversely, on the bullish side of the pair, traders would likely want to let price action break above the prior swing-high, which is at the 38.2% retracement of that most recent bullish move before looking to press that theme.
Chart prepared by James Stanley
— 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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