Analys från DailyFX
Gold Prices Probably Haven’t Bottomed-Out Yet
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- Gold Technical Strategy: Bearish; Gold prices set another fresh near-term low on Monday.
- At issue behind the Gold move is the prospect of ramped-up Fed hawkishness at next week’s FOMC meeting, and this can bring more pain to Gold prices.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at how Gold prices have been dropping like a rock since the U.S. Presidential Election. After initially moving up to a quick swing-high at $1,337 on the initial risk aversion on the night of the election, Gold prices have broken down by as much as -13.5% in the month since. And as stock prices continue to drive-higher as the world cheers the prospect of the return of the ‘reflation’ trade, Gold prices have continually been punished by the prospect of higher rates of inflation, and higher interest rates that would likely come in response to those rising inflationary forces.
Or to put more simply: What happened in Gold prices from the major top in 2011 until the lows in December of 2015 has been happening in a much more short-term, hyperbolic-like scale. Earlier in the year when the Fed capitulated on the whole ‘four rate hikes in 2016’ theme, Gold prices popped-higher with reckless abandon. Gold prices were up by 31.4% from the December low into the July high. But around that high-point in July, something changed: The Fed began to more aggressively talk up the prospect of rate hikes again. Since then, matters have not been the same.
Chart prepared by James Stanley
In October, some off-the-cuff Fed comments prodded the Dollar-higher under the presumption that rates might be moving up sooner rather than later; but it was the massive rally around the U.S. Presidential election that’s driven Gold prices into a beleaguered state. The extension of that rally, morphing into the ‘reflation trade’ could make for an even more forgiving backdrop for the Federal Reserve to attempt to firm rate expectations higher, and this could bring-on even more losses to Gold.
So, at this point, it’s rather difficult to hypothesize a bullish thesis for Gold without the Federal Reserve allaying some element of dovishness for next year. A hike at the bank’s next meeting in December is largely assumed, and the bank’s stance for 2017 and thereafter will likely be the primary driver around that next Fed meeting. But matters can change very quickly, especially when we’re talking about an international market like Gold, and it’s when a trend seems extremely one-sided that the trader should be most cautious as those underlying assumptions can significantly change the picture of price action in the pair.
For traders that want to look for short-side continuation, resistance can be sought out at $1,180.10 (most recent swing-high), $1,188.10 (prior swing-high), and at $1,200.51 (long-term Fibonacci level, May swing-low in Gold). Should prices break above $1,210, traders would likely want to abandon the bearish stance on Gold.
Potential support levels on Gold can be sought at prior price action swings of $1,165,35, $1,160.55 and again at $1,156.86. A long-term Fibonacci level is at $1,155.12 (61.8% retracement of the 2008-2011 move), and should this come into play, traders would likely want to expect some element of pause in the down-trend; and this can function as a top-end profit target for bearish-continuation plays.
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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