Analys från DailyFX
Gold Prices Resist Trend-Line as Rate-Hike Rally Extends
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- Gold Technical Strategy: Intermediate-term bullish, short-term bullish but overbought.
- Gold prices have extended their post-rate hike rally, now tallying an 8.4% gain since the March rate hike; further contributed to by the increase in geopolitical pressure.
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Gold prices have seemed to really love rate hikes…
When the Fed hiked rates in December, Gold prices bottomed and then spent much of the next 2 ½ months rallying. And then again in March, the Fed hiked rates shortly after which Gold prices set a ‘higher-low’ before rallying for the next month. As of now, that most recent rally hasn’t yet calmed, and prices are continuing to volley-higher while geopolitical pressures mount.
That December rally brought on a gain of 12.6% to Gold prices into the end of February, while the most recent iteration of that rally that started just after the March rate hike is 8.4% higher with yesterday’s print at $1,295.
But right around yesterday’s high is a very clear trend-line that can be found by connecting the July 11th high to the November 9th ‘election night spike’. So far, sellers have reacted as price action has moved-lower yesterday shortly after testing through that trend-line, thus, giving us a reaction right at the level.
Chart prepared by James Stanley
For near-term directional stances: Traders would likely want to stay cautiously-optimistic of a continuation-move higher, as the geopolitical pressure that has helped to extend this rally does not appear to be close to abating. This would also highlight the dangerous aspect of short positions in the current environment, as another surprise missile test or an overnight tweet may trigger even more concern around geopolitical pressures which can further drive Gold prices-higher. Shorts may simply want to avoid this potential for adverse excursion.
For those that do want to investigate bullish exposure in Gold prices, the shorter-term trend is still a bit overbought as RSI on the 4-hour chart is just now coming off a fairly clear case of divergence. We’ve included three zones to watch for support in the effort of catching the ‘higher low’ in an extension of the rally in Gold prices.
Chart prepared by James Stanley
For the bearish side:
The bearish side of Gold prices has really only seemed prominent in those periods where the Fed is talking up higher rates ahead of an impending rate decision. This was the predominant theme after the election as the ‘reflation’ trade got further priced-in to global markets, all the way to that December rate hike. But given this recent up-tick in geopolitical tension, there may be a synergistic effect taking place in which Gold prices are running-higher as risk-aversion bets increase, while this may also be seen as a deterrent to future rate hikes as the newly-installed Trump administration grapples with military issues rather than driving fiscal stimulus.
So it would appear that two things would be needed to really stoke the bearish side of Gold prices, and that would be a) a more hawkish Fed just after a rate hike a month ago and b) a cessation of geopolitical pressures on the Korean peninsula. Both of these seem unlikely in the current context, much less for both to take place at the same time.
— 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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