Analys från DailyFX
Gold Prices Fall to Fresh Lows as Oversold Conditions Begin to Show
Talking Points:
– Gold technical strategy: Long-term mixed, Intermediate-term bearish, short-term bearish.
– IG Client Sentiment is currently showing +4.15 traders long for every one short, and given retail sentiment’s contrarian nature, this is bearish.
– Q3 Forecasts have just been released and are available in our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.
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On Friday, we looked at the continued bearish run in Gold prices as a series of heavy offers drove prices down to fresh seven-week lows. As we opened this week, sellers remained active to push prices down further, but since the open of the Euro session we’ve seen a bit of strength develop to bring prices back up to a prior point of support, around the $1,215-handle. On the four-hour chart below, we’re looking at this morning’s bounce up to a prior point of support.
Gold Prices Bounce After Setting Fresh Low – Prior Support Showing Near-Term Resistance
Chart prepared by James Stanley
At this point, traders utilizing bearish continuation approaches would need to be comfortable with just how oversold the Gold market is right now. The bearish move in Gold prices started over a month ago, just ahead of the Senate testimony of ousted FBI Director, James Comey. And since that move started, there has been little slowdown or pullback. On the chart below, we’ve added the Relative Strength Index to indicate how oversold this move has become. Notice how RSI has begun to diverge, showing ‘higher lows’ on the indicator while price action moves down to lower-lows.
Gold Four-Hour Chart, RSI Divergence Indicating Oversold Market
Chart prepared by James Stanley
Big Support Awaits at $1,200
As we mentioned in our last article, there is a big support level in Gold at the $1,200-handle. This is a psychological rounded value, which will have a tendency to produce some element of support or resistance on its own, but this is also the 61.8% retracement of the ‘lifetime move’ in Gold prices, taking the Bretton Woods fix of $35/oz up to the 2011 high. The 61.8% retracement of that move comes in at $1,200.51, and this level has seen numerous support and resistance inflections since coming back into play four years ago.
Gold Weekly Chart with Long-Term Support Highlighted at $1,200
Chart prepared by James Stanley
The oversold nature of Gold prices makes entry a rather difficult matter given how far away prior swing-highs are. And given that we have a heavy slate of U.S. data on the horizon for later this week when Fed Chair Janet Yellen testifies in front of Congress on Wednesday and Thursday, there should be an abundance of drivers to keep this market volatile.
Traders looking to add bearish exposure to Gold prices can look for a cleaner entry setup by awaiting some element of resistance; so that bearish continuation approaches can become attractive again as risk could be more properly managed. Notice that there are considerable distance between these three points of potential resistance, and this just highlights how aggressive this bearish move has been; which also means that a corresponding retracement could run deep while the bearish trend still remains active. Should price re-break above the $1,248.98 point, which is the 50% retracement of the most recent major move, bearish approaches will no longer be as attractive, and this can be an interesting area to investigate for stop placement should $1,241 come into play as resistance.
Gold Four-Hour Chart with Potential Resistance Levels Applied
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
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
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
To be added to Christopher’s e-mail distribution list, please fill out this form
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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