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Gold Prices Hold Fibonacci Support, but for How Long?

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Talking Points:

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.

– Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

To receive James Stanley’s Analysis directly via email, please sign up here

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

gold price chart four hour time frame

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

gold price chart daily time frame

Chart prepared by James Stanley

The Anti-Dollar

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

gold price chart four-hour time frame

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX



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DXY Index Pacing for Gains Everyday this Week

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Talking Points:

– After a reprieve yesterday, US-China trade war concerns are materializing again after the latest Chinese trade balance report showed that its surplus with the US widened; USD/CNH was back near its highest close of 2018.

– US President Trump’s comments on the state of Brexit have rekindled concerns about the viability of the Theresa May government; GBP/USD is at its lowest level since July 3.

Sentiment for the US Dollar continues to suggest a neutral outlook after recent price developments.

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

The US Dollar (via the DXY Index) is pacing to gain everyday this week and due to post its first string of five consecutive up days since May 14 to 18. With trade concerns have been seemingly ebbing and flowing every day in recent memory, attention remains focused on any new developments on the US-China trade war front.

The offshore Chinese Yuan is weakening once again as market participants are divining the next move’s in the US-China trade war based on recent trade data. While some of the growth figures from the world’s second largest economy have been less than impressive recently, what has stood out is the fact that China’s trade surplus with the United States just grew to a new record surplus.

Given that US President Trump has turned his attention to countries that enjoy trade surpluses with the United States – Canada, China, Germany, Japan, among others – it would be logical to suggest the latest Chinese trade figures will not help ease tensions any further. Instead, it seems likely now that US President Trump will push harder for the new tariffs on $200 billion of Chinese goods, even if China is trying to back away from the ‘tit-for-tat’ type of negotiations.

Elsewhere, the British Pound is suffering as US President Trump and UK Prime Minister May convene in London. Ahead of the US president’s arrival, a wide-ranging interview was published in The Sun that was nothing short of an exocriating critique of how Brexit has gone under the current UK government’s watch.

Saying that a UK-US trade deal would be off – one of the reasons Leavers said would help soften the blow of a Brexit – US President Trump may have just poured fuel onto the fire of whether or not the May government will last following the wave of resignations last week. While still unlikely, a collapse of the May government ahead of the August Bank of England meeting could prove to provoke another hold in rates, setting the Sterling up for disappoint down the road.

DXY Index Price Chart: Daily Timeframe (July 2017 to July 2018)

DXY Index Pacing for Gains Everyday this Week

Overall, as has been the case throughout the week, the US Dollar’s (via DXY Index) technical posture continues to improve, but isn’t fully bullish on a momentum basis just yet. Price continues to hold above the daily 8-, 13-, 21-EMA envelop in sequential order as the DXY Index has now moved up to its highest level since July 2.

Daily MACD and Slow Stochastics both remain in bullish territory and are on the cusp of issuing ‘buy’ signals, suggesting that a return to the recent highs is possible. A move through the June 21 bearish daily key reversal and June 27 to 29 evening doji star candle cluster highs at 95.53 is necessary to truly reinvigorate US Dollar bulls.

Read more: DXY Index Gains Build Further; USD/JPY Nears Yearly High

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— 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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US Earning Season Begins, GBP Slides on Trump

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Check out the brand new DailyFX trading forecasts for Q3

MARKET DEVELOPMENTS – GBP FALLS AS TRUMP CRITISES PM MAYS BREXIT PLAN

At the last earning season, US corporate results had reached its best level in over 7 years with earnings growth of 24.8% and revenue gain of 8.7%. This trend is set to continue for this earning season with S&P 500 earnings growth expected to be above 20% again, given the backdrop of strong economic growth in the US and a boost from the Trump administrations tax overhaul continuing to support US corporate names and boost confidence. As such, if indeed US corporate results exceed expectations this could provide a nice distraction for equity traders and continue to buoy major equity markets.

GBP: The Pound had taken a hit after more negative headlines surrounding PM May’s Brexit strategy in which reports noted that President Trump had warned PM May that a soft Brexit proposal will kill prospects of a trade deal between the US and UK. This subsequently, pushed GBPUSD back towards 1.31 after losses had been exacerbated after a breach through 1.3175. Elsewhere, comments from the usually dovish BoE member Cunliffe had provided support for the Pound, having delivered a speech that was somewhat leaning on the hawkish side, subsequently boosting hopes that the BoE will deliver a rate hike next month.

USD: The Dollar index is moving back towards familiar technical resistance, suggesting that further gains could be limited with notable resistance potentially capping price action yet again. Focus continues to remain on the latest developments on US-China trade spat, which has quietened down since Tuesday.

NZD: The Kiwi is partially weaker on the higher greenback, edged even more so cautiously lower when local business manufacturing PMI underwhelmed. In New Zealand, that reading fell to 52.8 in June from 54.4 in May. That was the weakest reading since December 2017, making it a new 2018 low.

DailyFX Economic Calendar: Friday, July 13, 2018 – North American Releases

US AM Digest: US Earning Season Begins, GBP Slides on Trump

DailyWebinar Calendar: Friday, July 13, 2018

US AM Digest: US Earning Season Begins, GBP Slides on Trump

IG Client Sentiment: GBPUSD Chart of the Day

US AM Digest: US Earning Season Begins, GBP Slides on Trump

GBPUSD: Retail trader data shows 70.4% of traders are net-long with the ratio of traders long to short at 2.38 to 1. In fact, traders have remained net-long since Apr 20 when GBPUSD traded near 1.40897; price has moved 6.7% lower since then. The percentage of traders net-long is now its highest since Jul 05 when GBPUSD traded near 1.32203. The number of traders net-long is 3.4% higher than yesterday and 2.4% lower from last week, while the number of traders net-short is 6.1% lower than yesterday and 4.2% 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 sentiment and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias.

Five Things Traders are Reading

  1. DXY Index Pacing for Gains Everyday this Weekby Christopher Vecchio, CFA, Sr. Currency Strategist
  2. USD Technical Analysis: DXY at Familiar Resistance Yet Again, will it Hold?” by Justin McQueen, Market Analyst
  3. Charts for Next Week: EUR/USD, Euro-crosses, USD/JPY, Gold Price & Moreby Paul Robinson, Market Analyst
  4. Trade War Risk to be Offset by US Q2 Earning Seasonby Justin McQueen, Market Analyst
  5. GBPUSD Update: Sterling Hammered by Trump on Brexit” by Nick Cawley

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX



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Fed Testimony, China GDP and Earnings Compete with Trade Wars

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US Dollar Forecast – USD: Trade Wars vs Strong Economic Fundamentals – The Battle Continues

The US dollar should be powering ahead based purely on economic fundamentals but the over-arching threat of global trade wars is reining in the greenback’s performance.

British Pound Forecast – GBP: Strong UK Data may Boost GBP, However, Brexit Overhang Remains

The overhang of Brexit continues to provide an uncertain outlook for the Pound. However, strong UK data could potentially see GBP post marginal gains.

Australian Dollar Forecast – Australian Dollar Could Be Stuck Between RBA Minutes, Jobs Data

The Australian Dollar ‘s overall backdrop remains pretty bleak for bulls, but AUD/USD seems to have hit durable support and may have suffered enough for the moment.

Canadian Dollar Forecast –CAD Undermined by US Auto Tariff Threat. Hawkish BoC, So What?

The Canadian Dollar was unable to capitalize on a hawkish BoC amidst trade war concerns. Ahead, the US might impose auto import tariffs and local CPI could miss, undermining CAD.

Japanese Yen Forecast – USD/JPY Forecast: Dollar Strength to Persist on Hawkish Fed Testimony

The Humphrey-Hawkins testimony may influence the near-term outlook for USD/JPY as Fed Chairman Jerome Powell is scheduled to appear before Congress.

Oil Forecast – Crude Oil Sidesteps Trade War Fears, Inventory Drawdowns Continue

Crude oil has avoided the fate of other commodities that have been hit very hard by trade war fears. A massive drawdown in US crude stockpiles may help the argument of Bulls, but by how much remains unclear.

Gold Forecast – Gold Prices Flirt with Disaster- Key Support in Focus Ahead of Powell

Gold is once again testing critical support ahead of next weeks Fed testimony- it’s make-or-break here. These are the updated targets & invalidation levels that matter.

Equities Forecast –S&P 500, DAX & FTSE – Outlook Shrouded in Uncertainty

The week ahead doesn’t hold much in the way of major market moving events on the calendar, but that doesn’t mean there aren’t risks out there; the general outlook is indecisive at the moment.

Weekly Trading Forecast: Fed Testimony, China GDP and Earnings Compete with Trade Wars

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

See how retail traders are positioning in the majors using the IG Client Sentiment readings on the sentiment page.



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