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Price & Time: Gold Resuming the Downtrend?

By , Sr. Currency Strategist
25 July 2013 11:47 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:

EUR/USD:

PT_gold_body_Picture_4.png, Price & Time: Gold Resuming the Downtrend?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD overcame the 4th square root progression of the year-to-date low at 1.3205 earlier this week but has since stalled out near the 4th square root progression of the year’s high near 1.3240
  • While the exchange rate is above 1.3025 our near-term trend bias will remain higher
  • A close over 1.3240 now looks required to prolong the advance and setup a move to test critical resistance near 1.3300
  • Thursday and Friday are a minor cycle turn windows, but a bigger picture cyclical inflection point next week looks to be the real attraction and the ideal time for the broader downtrend to reassert
  • The 2x1 Gann angle line of the year-to-date low at 1.3150 is immediate support, but only aggressive weakness back under 1.3025 will turn us negative on the Euro

Strategy: Like holding long positions while above 1.3025.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3025

1.3150

1.3190

*1.3240

1.3275

GBP/USD:

PT_gold_body_Picture_3.png, Price & Time: Gold Resuming the Downtrend?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD failed again on Thursday near the 61.8% retracement of the June to July decline in the 1.5390 area
  • While over 1.5140 our near-term trend bias has to remain higher in Cable
  • The 1.5390 level remains a critical upside pivot with traction above this level needed to trigger a renewed push higher in the rate
  • Near-term focused cycle studies favore weakenss over the next couple of days, but next week looks like a more important cyclical turn window
  • The 4th square root progression from the June high at 1.5250 is immediate support, but only weakness below 1.5140 turn us negative on Sterling

Strategy: Like holding long positions while over 1.5140, but these should be reduced after the repeated failures at 1.5390.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5140

1.5250

1.5295

*1.5390

1.5440

USD/CAD:

PT_gold_body_Picture_2.png, Price & Time: Gold Resuming the Downtrend?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CAD traded to its lowest level in over a month on Wednesday before finding support at the 61.8% retracement of the 2011 to 2012 decline in the 1.0265
  • While under the 2nd square root progression of the year’s high in the 1.0400 area our near-term trend bias will remain lower in Funds
  • The 1.0265 level is a minor pivot, but weakness under a Fibonacci cluster at 1.0240 is really needed to trigger the next significant decline
  • The middle of next week looks like a clear cycle turn window in the rate
  • The 50% retracement of the June to July advance at 1.0370 is immediate resistance, but only traction over 1.0400 turns us positive on USD/CAD

Strategy: Like holding short positions for a few more days while under 1.0400.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CAD

*1.0240

1.0265

1.0295

1.0370

*1.0400

Focus Chart of the Day: GOLD

PT_gold_body_Picture_1.png, Price & Time: Gold Resuming the Downtrend?

XAU/USD reversed during the medium-term cycle turn window we pinpointed for this week albeit from higher levels than we had initially anticipated. We had been eyeing the 50% retracement of the June range at 1301 as a natural stopping point, but a breach of this level at the start of the week forced a move to the next point of symmetry near the 161.8% projection of the late June/early July correction near 1348. Wednesday’s clear failure from this level at the tail end of the turn window sets the stage for a more important move lower over the next few days/ weeks. The 1310 level is initial support, but a break of 1274 is really needed to set off a more important decline to re-test 1215. With the turn window now over, strength back over 1348 would be very surprising. Such a scenario would be very positive for the metal and likely set up a much more important move 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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25 July 2013 11:47 GMT