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Price & Time: The Topping Pattern in Gold

By , Sr. Currency Strategist
02 October 2013 11:45 GMT

Talking Points

  • GOLD triggers multi-month Head & Shoulders pattern
  • EURO nearing a top
  • Kiwi threatening key support

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Focus Chart of the Day: GOLD

PT_gold_body_Picture_4.png, Price & Time: The Topping Pattern in Gold

Our trepidation over the lack of upside momentum in Gold following last week’s cycle low looks justified after yesterday’s impulsive decline through several key support levels near 1300. A clear head & shoulders topping pattern was triggered on the decline and this projects a further potentially serious move lower in the weeks ahead. Often times in widely watched markets like Gold, such “clear” patterns have a way of morphing themselves into technical traps as market participants search out the path of most pain. We are not saying this will happen in this particular case, but it is worth being aware of as the metal hovers around the 1300 neckline. A move through the early August low near 1273 on a daily closing basis would do wonders to quell fears of a false pattern scenario.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

PT_gold_body_Picture_3.png, Price & Time: The Topping Pattern in Gold

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD traded to its highest level since early February on Tuesday, but once again failed to close above the 7th square root progression of the year’s low at 1.3545
  • We are wary of some sort of top forming here, but whilst above the 2nd square root progression of the year’s high at 1.3475 our near-term trend bias has to remain higher in the single currency
  • A close over 1.3545 is needed to trigger a more meaningful move higher towards attractions over 1.3600
  • Tuesday was a medium-term cycle turn window for the Euro
  • Weakness below 1.3475 on a daily close basis would suggest a top of some kind in the Euro has indeed been seen

EUR/USD Strategy: Reduced long positions favored while above 1.3475. May look to sell on a break of this level.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

1.3430

*1.3475

1.3515

*1.3545

1.3590

Price & Time Analysis: NZD/USD

PT_gold_body_Picture_2.png, Price & Time: The Topping Pattern in Gold

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD failed just shy of the 9th square root progression of the year’s low at .8445 late last month and has come under steady pressure ever since
  • Weakness below the 2nd square root progression of the September high at .8250 has shifted out near-term trend bias to negative
  • A convergence of the 6th square root progression of the year’s low and the 3x1 Gann angle line of the year’s closing high near .8200 is key support with a close below needed to prolong the decline
  • Today and early next week are minor turn windows in the rate
  • A move back above .8340 would shift the trend bias back to positive in the Kiwi

NZD/USD Strategy: Like selling into strength against .8340 over the next few days.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

NZD/USD

0.8130

*0.8200

0.8225

0.8280

*0.8340

Price & Time Analysis: EUR/CHF

PT_gold_body_Picture_1.png, Price & Time: The Topping Pattern in Gold

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/CHF traded to its lowest level since early May on Monday before rebounding
  • While below the 3rd square root progression of the year’s high at 1.2315 our near-term trend bias will remain lower
  • A downside attraction for the cross looks to be the 4th square root progression of the year’s high at 1.2200 with weakness below there needed to expsose a Gann angle convergence near 1.2165
  • The latter part of this week is a medium-term cycle turn window for the cross
  • Interim resistance is seen at 1.2275, but only a move through 1.2315 turns us positive on EUR/CHF

EUR/CHF Strategy: Short positions favored while below 1.2315, but we like reducing them into the turn window at the end of the week.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/CHF

1.2165

*1.2200

1.2235

1.2275

1.2315

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

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

Looking for a way to pinpoint sentiment extremes 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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02 October 2013 11:45 GMT