– Gold prices have continued to gyrate within a downward-sloping channel after setting a fresh yearly-high in late-January. Support thus far has held above $1,300; but short-term charts show a continued response from sellers, pointing to the possibility of near-term down-side before the longer-term bullish trend might be ready for resumption.
– The next two weeks bring a heightened focus around the US Dollar, and Gold as the ‘Anti-Dollar’ will likely be along for the ride. Tomorrow brings US CPI, and next week brings a Federal Reserve rate decision, currently carrying an 89% probability of a hike.
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Gold Prices Gyrate After Rallying-Up to Fresh Yearly Highs
Gold prices were on a tear as we came into 2018, extending the rally that had started in mid-December to go along with another bearish kick to the US Dollar. After setting support at $1,236 in December, prices were almost $130 higher just six weeks later. But since that fresh yearly high posted in late-January, buyers have been unable to muster any significant strength, and Gold prices continue to gyrate within a bearish channel, connecting the post-January highs and the post-January lows.
Gold Price Chart: Bearish Channel Builds After Print of Fresh Yearly Highs Above $1,357.50
Chart prepared by James Stanley
Fibonacci Support Bending, But Not Yet Broken on the Daily Chart
It hasn’t yet been an entirely negative story in Gold since that high was set, as that bearish channel has come along with a respectable response at support. Adding a Fibonacci retracement to the bullish move looked at above shows a 38.2% retracement at $1,316.63, and this has largely helped to hold support in the pair on a Daily basis. Intra-day, this has been messy, but it’s notable that we haven’t seen a daily close below this price since the first incursion earlier in February.
Gold Price Chart: Daily Time Frame, Fibonacci Support Bending, Not Yen Broken by Daily Close in March
Chart prepared by James Stanley
The next couple of weeks could be volatile for the US Dollar. Tomorrow morning brings US CPI for the month of February, and next Wednesday brings a FOMC rate decision with the high-expectation of getting a rate hike. This could also play out in Gold, as the build of that bearish channel syncs well with the US Dollar trying to set support throughout February. Nonetheless, traders should be careful with banking on a support break of a level that’s held-up fairly well in the face of increasing pressure over the past few weeks.
Longer-Term Stances in Gold
On a longer-term basis, we’d be looking at an immature bull flag formation, given the recently-started bearish channel at the top of a strong bullish run. But, near-term price action remains messy, and it can be difficult to voice that longer-term view until we see a more relevant level come into play. A top-side break of the March high at $1,340.50 opens the door for bullish approaches, with targets set towards $1,350, $1,357.50 and then the 2018 high at $1,366.06.
Conversely, breaks below the 50% retracement open the door to a deeper sell-off, with next supports cast towards $1,296, and then $1,286.09.
Shorter-Term Approaches in Gold
Shorts can be investigated on a resistance test around the 23.6% retracement at $1,335.52, which had helped to carve out the highs last Tuesday. That high from last Tuesday came-in shy of the prior swing high, at $1,341.04 and $1,340.50, respectively, and this would be looking for another lower-high to continue the sequence. This would allow for stops above $1,341.04 with targets set to the current swing-high of $1,324.05; affording a better than one-to-one risk-reward ratio. If resistance does not show between $1,335.52 and $1,340.49, then the bearish trade is nullified by fresh highs. Secondary targets can be set to the 38.2% Fibonacci retracement at $1,316.63; and if we do finally get a Daily close below this level, tertiary targets can be set to the 50% retracement at $1,301.36.
Gold Price Chart: Four-Hour Time-Frame, Resistance Zone Applied
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on Gold prices? Our DailyFX Forecasts for Q1 have a section specifically for Gold. We also offer a plethora of resources on our Gold page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
— Written by James Stanley, Strategist for DailyFX.com
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DAX & CAC Technical Outlook – More Strength Ahead?
DAX/CAC Technical Highlights:
- DAX yet to show signs of reversing despite resistance
- Big-picture topping potential remains
- Strength has the CAC trading in ‘open space’
DAX yet to show signs of reversing despite resistance
The DAX rally off the lows found opposition last week after a slight breach above a swing-high in February and just below the 200-day MA, however; the reversal sparked only very minor selling. Yesterday’s turn back higher has the market geared up to take on the 200-day and better.
On a breakout above the 200, a thorough testing of the underside of the double-top from November-January should be in play. The zone extends from 12745 up to the mid-12800s and is likely to prove problematic. How problematic, we’ll need to wait and see.
Should we see a strong rejection, then we’ll perhaps flip the script to a short bias, but if it is anything like what we saw this past week, then we’ll need to respect the trend off the March low. There is still the possibility that we see a long-term top develop should we see a strong turn down in the weeks ahead.
We’ll delve more into the ‘head-and-shoulders’ top scenario at a later time should it become relevant. If this scenario is to come to fruition, it’s worth noting that the DAX shouldn’t climb too much higher from current levels.
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DAX Daily Chart
Strength has the CAC trading in ‘open space’
Of the two big Euro-zone indices, the CAC has been an absolute monster off the late-March low. Nothing has provided any real opposition, not the 200-day MA, not the late-Feb swing-high. Looking higher, there isn’t much preventing the index from trading higher towards the January high, 2007 trend-line.
This doesn’t mean the index will necessarily get there without set-backs, or at all, but as far as quality price levels to lean on, resistance is difficult to come by. As long as we don’t see a strong turnabout in momentum, the benefit of the doubt remains with the long-side. Support first clocks in at the Feb swing-high around 5363.
Heads up, the ECB meets on Thursday. For live coverage, you can join my colleague Nick Cawley at 11:30 GMT time.
CAC Daily Chart
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Key Reversal Targets 2017 Slope Support
The British Pound has fallen more than 3% off the yearly highs with the decline taking out the April opening range lows. While the broader outlook does remain constructive, near-term the risk for a pullback in price has us looking for a possible exhaustion lower down near structural support.
GBP/USD Daily Price Chart
Technical Outlook: In my last Weekly Technical Outlook we noted that Cable was approaching the 2018 highs at 1.4346 with a breach above this threshold needed to keep the broader long-bias in play. Price posted an outside-weekly reversal off this threshold before break below the objective April opening range lows yesterday. The decline also validates a break of the November slope line and leaves the risk lower while below the monthly open at 1.4024.
Note that yesterday’s close marked the fifth consecutive daily decline – three of the last five instances of such an occurrence saw a slight reprieve (a day or so) before registering a new low. That said, look for initial support along the lower parallel.
GBP/USD 240min Price Chart
Notes: A closer look at price action sees Cable trading within the confines of a near-term descending pitchfork formation extending off the March highs with this week’s decline slipping below the monthly range lows / 61.8% retracement at 1.3965. IF this break is legit, topside advances should be capped by the weekly highs / monthly open resistance at 1.4024/31. A break lower from here targets the lower parallel / 100-day moving average at 1.3854/67 with broader bullish invalidation for the multi-year uptrend at the March low-day close at 1.3775.
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Bottom line: The British pound has broken below the monthly opening range but looks like the decline may be losing some steam here near-term. From a trading standpoint, we’ll favor fading strength while below median-line of the descending pattern with the decline to ultimately offer more favorable long entries near long-term slope support.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
GBP/USD IG Client Positioning
- A summary of IG Client Sentimentshows traders are net-long GBPUSD- the ratio stands at +1.33 (57.0% of traders are long) – weak bearishreading
- Long positions are 15.2% higher than yesterday and 83.1% higher from last week
- Short positions are 0.5% lower than yesterday and 42.6% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant Data Releases
Other Setups in Play
– Written by Michael Boutros, Currency Strategist with DailyFX
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Respect New Uptrend For Now
- The ASX 200 is climbing again
- Range trade has given way to a new upside channel
- That channel will take it up to 6000, however, and there bulls should probably worry
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The ASX 200 broke out of its ascending channel to the downside mid month, but price action since suggests that its subsequent consolidation may have been mere prelude to another upward foray.
The index has been admittedly rangebound since, trading between. April 16 and 17’s intraday low of 5831.1 and the intraday high of April 23 and 19 at 5904.9. At the time of writing (0100 GMT Tuesday) that range is history, if only just with the index a bare half dozen points above the top.
If it can close above there, then the 5934-5971 region last traded in mid-March could form the next target for the bulls. However above that the 6,000 level beckons and that barrier has proved too much for the index so often, both in the recent past and, indeed, for the past decade, that it’s probably wise to expect plenty of cashing out should it get there again.
Downside support may come in at the base of a new, nascent uptrend channel, which is at 5857.8 on Tuesday. Below that there is likely to be a cluster of near-term props forming in sum a band between April 10’s highs around 5848 and April 2’s closing low of 5686.
Still the uptrend should probably be respected for the moment, with the ASX currently in the middle of it. The Sydney stock benchmark’s simple moving averages fail to suggest anything obviously amiss, with the 20-50- and 100 day version in rank order and nicely spaced. The index’s Relative Strength Index is nudging higher, as you’d probably expect given the nice little run-up seen this month. However at a stolid 59 it doesn’t suggest any vicious overbuying.
Resources for Traders
Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.
— Written by David Cottle, DailyFX Research
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