Gold has hit the support of 1.6115 . At that particular level, Bank of England’s Carney said that Bank of England may start to increase interest rates next spring if labour market conditions continue to improve. Of all places to release the news, they choose a support level. A morning star formed at the support and price then traded higher. I personally believe that the GBPUSD is over sold. However for the GBPUSD to move higher, it first has to close above 1.6282. I am still weary of a strong GBP. Possible sell levels are marked in the bigger blue box area.
Like the GBPUSD, EURUSD is also oversold to me. Price is trading near the support of 1.2834. However I am not buying the EURUSD as it is in a very strong downtrend backed by poor fundamentals. If price manage to reject the support area of 1.2834, possible retracement areas are 1.3126 and 1.3196. If price reject those level, continue to sell the EURUSD.
USDJPY are currently trading at the 6 year high levels. I am holding a buy view on the USDJPY. Since prices are quite high at the moment and also trading near the resistance of 107.60, I am waiting for the USDJPY to retrace. If 107.60 is indeed the resistance level which the USDJPY will reject, I would target the 105.66 – 105.55 , 105.07 – 104.94 or 104.45 to look for buy. Any price action of rejecting the mentioned levels, buy USDJPY.
I mentioned in my earlier postings that I have a sell gold view. If gold manages to close strongly below 1180.11, we could see gold testing 1041.56. Stay tuned to the 1228.18 support level which it is trading now to see if price will reject this support area.
Patience pays. If we have a close which looks like this come Friday 12th Sept, we would then have a bearish engulfing pattern on the weekly chart which is a good thing if you had shorted the AUDUSD. I have been holding this trade since July 24th, 2014 riding the ups and down believing the main trend is down as explained in my article 710 pips on the Aussie trade, which is a step by step explanation on why I shorted the AUDUSD.
What we have here is the daily chart. Yesterday’s price action showed that 0.9242 support has finally been broken. This morning, Australia showed positive employment news where jobs increased by 121k versus estimates 15.2k and unemployment rate dropped 0.2% to 6.1%. So what we will potentially see is a potential of AUDUSD going up and the place to look out for is 0.9242 where old support become new resistance. The maximum area which I think AUDUSD should retrace if the downtrend continues is around 0.9282 area. So look for shorts at this area.
On Monday, I posted that we should look for US Dollar index short. This is because last Friday 5th Spetember 2014, we had a doji after a big white candle. Price on Monday this week however manage to close above the high of the doji which indicates that the uptrend momentum will continue.
3 reasons why the momentum is slowing down:
1) Price on Tuesday manage to rally above the high of Monday but was not able to sustain the buy momentum. At the end of the day, price close below previous day high. Both candles on Tuesday (9th Sept) and Wednesday (10th Sept) shows a spinning top candle which signifies the momentum is slowing down.
2) Price is trading resistance at 84.13. Price trading at resistance is one thing but spinning tops at resistance indicates that there is a potential reversal at this resistance. This area is the 2 year high of the dollar index.
3) The US Dollar Index buy trend is truly over extended. There was no reversal at all. As we all know the law of gravity, what goes up must come down especially if they did not go up gradually. The move was just too fast.
What to look out for:
I have highlighted the high of the spinning top in purple. That is the current de facto resistance to be broken. If there is a price close above that level, then price will test the 2 year high of 84.75.
Any bearish indication as published in my candle stick article, would see price retracing down to these possible areas of 83.59, 82.91, 82.41, 81.92. These areas are valid as long as the current year high stands at 84.52.
As usual, you can always have an option not to trade against the main trend is a buy. Alternatively you can wait for price to retrace to the said area and wait for bullish reversal signals before you attempt your buy again and ride the main trend.
Be prepared for a possible short Dollar Index (USDX) this week. Price are trading at resistance of 83.59 and we have double resistance at that level. On the daily chart we have a doji signaling the market is tired, thus creating a good opportunity for a possible USDX short. Target is the 21sma on the Daily chart.
The EURUSD sell further accelerated when Draghi announced last Friday that he would like to call for action to spur growth by suggesting further stimulus for the Euro region. Do bear in mind; it is a suggestion and not a confirmation. Whatever it is, one thing is for sure, the Euro zone has not recovered from previous stimulus. I am skeptical of the stimulus being introduced immediately. This is because, Mondays gap was not impressive and subsequent price action does not suggest huge selling as yet. I am not saying it may not but it has not happen yet.
I personally feel that the EURUSD is oversold and we should see EURUSD moving sideways or trading back to the daily 21sma.
For those who are not comfortable buying EURUSD for the short term, stay with the main trend which is a sell and sell from established resistance areas. Places to sell are the 1.3302 – 1.3336 region or the 1.3425 region.
AUDUSD fail to break 0.9242 twice in a row within 2 weeks. When price rejected 0.9242 strongly on 21st August 2014, I took profit on shorts traded at 0.9334. I am still holding shorts which we traded at 0.9440 as I believe the AUDUSD will not go up that high for this year.
Next week would be an exciting week for Aussie Dollar as we have Manufacturing PMI news coming out from China on Monday and RBA Statement on Tuesday.
Till then stay at the sideline and wait for the news to come out before we make any trading decisions. I have a sell bias but I need the overall fundamental to support my view.
Gold thrives on inflation which means Gold can only go up if there is inflation. The beginning of Quantitative Easing marked the boom of the Gold. Let’s review the situation, US has been printing money and its almost ending it QE, Europe is still printing and so is Japan. However one thing is evident, the 3 large economies have recently experienced inflation below 2 percent. Financial Times printed out that, markets do not expect Euro inflation to rise at all in the next 5 years. This means we will not see strong gold.
Look to sell gold at established resistance areas like the 1316 region, 1367 region, 1393 region or 1532 region. Wait for bearish confirmation when price trade at those areas.