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Price & Time: Top in Gold Next Week?

By , Sr. Currency Strategist
19 July 2013 12:07 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.

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Foreign Exchange Price & Time at a Glance:

USD/JPY:

PT_Gold_body_Picture_4.png, Price & Time: Top in Gold Next Week?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/JPY has moved steadily higher since finding support at the 5th square root progression of the June low in the .9430 area
  • Strength over the 100.20 area has shifted our near-term trend bias to higher
  • However, the 78.6% retracement of the May-June decline at 101.60 needs to be overcome soon to signal that a more important move higher is indeed underway in the rate
  • Near-term cycles are muddled with a minor turn window seen early next week
  • The 1x2 Gann angle line from the 3Q12 low at 99.05 remains key support and only weakness below this level would undermine the immediate positive tone and turn us negative

Strategy: Like the long side on a clear break of 101.60.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/JPY

*99.05

99.65

100.25

101.15

*101.60

AUD/USD:

PT_Gold_body_Picture_3.png, Price & Time: Top in Gold Next Week?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD has tested the 1x2 Gann angle line of the year-to-date closing high (now at .9235) several times over the past few days
  • While over .9040 our near-term trend bias will remain higher in the Aussie
  • However, a close over .9235 is needed soon to signal that a more important move higher is developing
  • Very short-term cycle studies suggest today is a minor turn window
  • The .9170 level is immediate support, but only aggressive weakness below .9040 would turn us negative on the Aussie

Strategy: Like holding long positions while over .9040 and may look to add if we see a close over .9235.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

*0.9040

0.9170

0.9220

*0.9235

*0.9295

USD/CHF:

PT_Gold_body_Picture_2.png, Price & Time: Top in Gold Next Week?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CHF remains in a weak position since failing last week at the 2x1 Gann angle line of the year-to-date high near .9750
  • While below .9540 our near-term trend bias will remain negative in the rate
  • The 5th square root progression of the year’s high near .9340 remains a key downside pivot with weakness below needed to prompt a more material decline
  • Monday and Thursday look to be minor turn windows
  • A close over .9540 is needed to turn the technical outlook more positive

Strategy: Only reduced short positions favored while under .9540, but like adding on a move through .9340.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CHF

0.9340

0.9405

0.9415

0.9475

*0.9540

Focus Chart of the Day: GOLD

PT_Gold_body_Picture_1.png, Price & Time: Top in Gold Next Week?

Monday and Tuesday of next week is a medium-term cycle turn window in Gold. Given the persistence of the trend over the past three weeks with the approach of key resistance in the form of the 50% retracement of the 2008-2011 advance (polarity) and the 4th square root progression of the year-to-date low between 1301 and 1316 - a top of some form developing is the favored scenario. A failure around this resistance zone and follow on weakness below 1270 will confirm that a high is in place, but under 1248 is really required to signal the onset of a more important decline in the metal. Strength in XAU/USD beyond 1316 after Tuesday would invalidate the cycle turn window and shift our focus higher.

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

Looking for a way to pinpoint sentiment extremes in Gold in real time? Try the Speculative Sentiment Index.

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

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19 July 2013 12:07 GMT