Analys från DailyFX
Gold Prices Still Flagging, Fall to Deeper Support
Talking Points:
- Gold prices continue to trade within the bull flag formation that’s been operative since early-July.
- While the bull flag denotes continuation potential of the move-higher, prices have been under pressure after setting another ‘lower-high’ to kick off last week.
- If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q4.
In our last article, we looked at the bull flag formation that has built in Gold prices since early-July. At the time of that last article, Gold prices had just caught another jump-higher after a Federal Reserve meeting didn’t bring on the level of hawkishness that was anticipated and, in turn, brought weakness into the US Dollar. But as we warned, that move may not have staying power and traders would likely want to wait for either a top-side break of the bearish channel, or a deeper level of support in the effort of getting a cleaner entry.
We had specifically looked at the prior swing-low in the $1,312 range as a potential level of support; this was the swing-low in mid-September, and this was just above the prior swing-low set at the end of August. This brings up a potential setup in which traders can look to trade the trend-side bias in Gold prices whilst price action still remains within the channel. Traders can look at a stop below the $1,298.00 level of support, with an initial target to the prior swing-high of $1,327 to get a better than one-to-one risk reward ratio while price action remains in the flag formation. A secondary target can be set to the $1,342 level of resistance (the previous swing-high) to look for a better than 1-to-2.5 risk-reward ratio. And if we do, in fact, get the top-side breakout of the flag formation, traders can cast tertiary profit targets to the July swing-high of $1,375.04.
For traders that want to approach Gold more conservatively, they’d likely want to await a top-side break of the flag before investigating long positions. The same $1,342 level of resistance that set the previous swing-high could be an opportune zone to look for that next ‘higher-low’ level of support should Gold prices pose a top-side breakout. Alternatively, traders can wait for price action to move down to the long-term support zone in the $1,285 vicinity, which has multiple Fibonacci retracements and price action inflections over the prior seven months.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX
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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.
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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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