Analys från DailyFX
Gold Prices Rally Up to Pivotal Resistance Zone
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- Gold Technical Strategy: Near-term: Previously aggressively bearish leading into the rate hike, now aggressively bullish after the rate hike took place.
- The apparent takeaway being that the Fed was not hawkish enough to keep bears in control of Gold price action.
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In our last article, we were looking at aggressively bearish price action in Gold prices as we walked-in to last week’s rate hike from the Fed. And the term ‘rate hike’ is important here rather than ‘rate decision’, because the Federal Reserve had widely-telegraphed their intentions ahead of the move. As we walked into last week’s rate decision it appeared that markets had already priced-in the move (see our prior article, Gold Prices Slide Down the Slope of Despair for further explanation): Gold prices were sitting on a critical support level at $1,200, which is the 50% retracement of the ‘big picture’ move in Gold prices, taking the Bretton Woods-fix of $35/oz up to the 2011 high at $1,920.
But along with that rate hike from the Federal Reserve came a healthy dose of caution. Fed Chair Janet Yellen avoided eliciting any significant hawkish concerns around policy normalization during her press conference; and the Fed’s dot plot matrix was curiously dovish – as the bank did not increase their expectations for rate hikes going out to the end of 2018. As we had walked into that rate hike, the various iterations of Fed-speak were noticeably hawkish. Markets were likely expecting that hawkish Fed-speak to translate into stronger expectations for more aggressive interest rate hikes. When this didn’t happen, markets responded with a strong sell-off in the U.S. Dollar, and a bullish pop in Gold prices. At this point, we’ve rallied up to a huge level in the Gold market, around the $1,250 psychological level.
Chart prepared by James Stanley
So, this would appear to be another example of markets not ‘buying’ the Fed’s rate hike plans. After eight-plus years of passive accommodation, with numerous starts and stops, markets have come to expect the Fed to err on the side of caution. And given the high degree of uncertainty around the potential for fiscal policy in the United States, coupled with the uncertainty of the continued recovery in the United States; and it can make logical sense as to why that expectation has been built-in.
For those that do want to press bullish-themes in the Gold market, awaiting a break of the $1,250 level could make the prospect of additional top-side considerably more attractive. This is a big level for Gold prices, as this was the ‘Brexit swing-low’ as well as being the 50% retracement of the ‘big picture’ move; and we’ve seen numerous support/resistance inflections off of this level. Traders can let bulls drive price action beyond this resistance to highlight the potential for deeper movement, at which point this current level of resistance can be re-assigned as support in the effort of bullish continuation.
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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