Analys från DailyFX
Gold Prices: Is the Digestion Nearing Demise?
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Talking Points:
- Gold Technical Strategy: Previous long setup stopped out, new long setup identified.
- Since tagging a key Fibonacci level a month ago, Gold prices have continued to digest lower after a recent bout of strength.
- If you’re looking for more trade ideas, check out our Trading Guides; they’re free.
In our last article, we looked at another long setup in Gold ahead of a trove of Central Bank announcements. This was an extension of the same themes that we looked to play over the previous three months, as we had watched Gold form a bottom, then churn near support, and eventually breakout to the upside. And after that initial top-side breakout over the vaulted Fibonacci level at $1,087.50, there were numerous top-side setups available off of support, as we had identified in early February, and again a couple weeks later. This led to the most recent setup ahead of those Central Bank announcements in March that led to a stop, and we now sit flat.
At issue is the retracement that’s come in since the most recent swing-high was pegged back in March. This high came in right at a key Fibonacci level at $1,283.82, which is the 38.2% retracement of the secondary major move in the pair, which is taking the low from the year 1999 at a price of $253.30 up to the 2011 high at $1,920.80. So this is and was recently confirmed as a key level in Gold, and since that resistance came into play a relatively smooth downward-sloping channel has developed, which, when taken in context with the bigger-picture top-side breakout, is a bull flag formation.
For those that want to treat the move aggressively, they can look to recently tested support values to plot for an extension-like move in the bigger picture up-trend. The key level in the current setup is at $1,217.26, which is the 38.2% retracement of the prior major move, taking the January 2015 high down to the July 2015 low. The past four trading days have seen price action catch support in this vicinity, and this could provide motive for top-side entries. Traders can look to lodge stops below the $1,200.41 level, which is both a major psychological level as well as being the 61.8% retracement of the ‘big picture’ move in Gold, taking the low of $34.95 set in the year 1968 up to that same 2011 high (shown in black on the below chart).
Profit targets can be directed towards those same levels that we had looked at previously, with the $1,251.74 offering a ratchet level with which initial targets could be realized while also adjusting stops to break-even. After that $1,283.82 becomes a level of interest as we had discussed earlier, and should new highs come in targets could be sought at $1,301.61, which is the 50% retracement of the 2008 low to the 2011 high.
Created with Marketscope/Trading Station II; prepared by James Stanley
— Written by James Stanley, Analyst 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
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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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