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Price & Time: Gold Nearing a Critical Level

By , Sr. Currency Strategist
01 May 2013 11:35 GMT

This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

Foreign Exchange Price & Time at a Glance:

GBP/USD:

PT_gold_near_critical_body_Picture_4.png, Price & Time: Gold Nearing a Critical Level

Charts Created using Marketscope – Prepared by Kristian Kerr

-GBP/USD has traded steadily higher since finding support at the 3rd square root progression of the year-to-date low in the 1.5195 area

-Our bias is higher, but a close over the 1.5575 50% retracement of the February to March decline is needed to extend the advance to 1.5650 and beyond

-Near-term focused cycles suggest potential for a minor turn on Wednesday or Thursday

-A convergence of various Gann levels in the 1.5440 area is now key support

-Weakness below this support zone would undermine the immediate positive technical structure in the pound and turn us negative

Strategy: Looks vulnerable to a minor correction. Prefer buying on dips than chasing here.

USD/CAD:

PT_gold_near_critical_body_Picture_3.png, Price & Time: Gold Nearing a Critical Level

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/CAD has come under aggressive downside pressure since failing repeatedly last week at the 2nd square root progression of the early April low in the 1.0280 area

-Our bias in funds is lower with focus on the 3rd square root progression of the year-to-date-high in the 1.0035 area

-Traction below this level is needed to setup a steeeper decline towards .9960 and below

-Cycle analysis suggests near-term risk of a minor turn over the next day or so

-The 2nd Gann square root progression from the year-to-date high near 1.0135 is now key resistance with strength above required to turn the outlook more positive for Funds

Strategy: The break under the early April low has created a pretty ominous looking chart pattern. Want to see if this minor turn window sets up a rally to sell into.

EUR/GBP:

PT_gold_near_critical_body_Picture_2.png, Price & Time: Gold Nearing a Critical Level

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/GBP touched its lowest level since late January last week before finding support near the 50% retracement of the 2011 to 2012 decline in the .8400 area

-Rebound from there has so far been unimpressive and our bias is still to the downside in the cross

-The .8400 level is now a key technical focal point with weakness under this level needed trigger a renewed push lower toward s.8350 and below

-Near-term time cycle analysis points to a minor turn at the end of the week or early next week

-The 61.8% retracement of the late April decline in the .8545 area is important resistance and only strength over this level turns us positive on the cross

Strategy: Succession of lower highs and lower lows since late February favors selling on strength.

Focus Chart of the Day: Gold

PT_gold_near_critical_body_Picture_1.png, Price & Time: Gold Nearing a Critical Level

The bigger picture turn window we have highlighted for this week in a variety of markets continues to evolve. So far there have been no real signs of a turn other than a few minor divergences. We will continue to monitor and update as needed. For now our focus is on gold. The metal is nearing an important resistance zone that should prompt a reaction from the market. As the ellipse above shows, the 1500 area in spot gold is a convergence of various different potentially important levels including the 1x1 Gann angle line from last year’s closing high, the 5th square root progression from the year-to-date low, the 38% retracement of the October to April decline and the 61.8% retracement of the March to April decline. If the 1320 area is going to undergo some sort of re-test we would expect it to start from somewhere around 1500. On the other hand, if the metal just blows through 1500 then the importance of last month’s low will increase significantly.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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01 May 2013 11:35 GMT