Analys från DailyFX
Gold Prices Channel-Lower Ahead of FOMC
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- Gold Technical Strategy: Intermediate-term mixed, short-term bearish.
- Gold prices have continued to move-lower ahead of the Fed’s May rate decision; but a key area of potential support remains around $1,250.00.
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In our last article, we looked at the continuation of bearish momentum in Gold prices as the move-lower extended below yet another area of support at $1,261. The most apparent catalyst for Gold prices since the out-sized bearish move around the U.S. Presidential election has been the Federal Reserve. When the bank hiked rates in December, a low was set in Gold prices at a level of $1,122.81, after which prices rallied for much of the next two-and-a-half months.
As we entered March, the Federal Reserve had already begun talking up another rate hike, and Gold prices spent the first half of the month moving-lower until we eventually got that rate hike. But at that point, another higher-low was set, and Gold prices proceeded to rally for the next six weeks; driving-up to a new five-month-high at $1,296.46.
So, over the past five months, the post-rate hike environment created by the Fed has been a bullish catalyst to Gold prices; and the bearish driver has been traders tightening up ahead of rate decisions – much as we saw in the first half of March. Later today, we get the Federal Reserve’s rate decision for the month of May, and for the past two-and-a-half weeks, Gold prices have been channeling-lower, very much fitting the profile of what’s been seen in price action around Gold prices since that December rate hike.
Chart prepared by James Stanley
With the Federal Reserve’s rate decision for the month of May on tap for later this afternoon, Gold prices could receive a considerable boost of volatility. For traders looking to implement bearish strategies, they’d likely want to see this zone at $1,250 yield; at which point this area could be re-assigned in the effort of seeking out ‘lower-high’ resistance.
Alternatively, for those looking to implement bullish strategies on Gold – watch the area around $1,250, and if support does show-up around this afternoon’s Federal Reserve meeting, the stage could be set for playing top-side reversals. For those that want to take a more conservative route towards trading a bullish move in Gold prices, we discussed how traders can use price action to trade into new trends in our education article from yesterday, and this methodology could certainly be adapted to the current setup in Gold.
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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