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Gold Price Challenges Resistance at Prior Support as USD Bulls Charge

Price action and Macro.

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Gold Price, US Dollar Talking Points:

- It was almost a delayed reaction as the US Dollar broke-out a day after Gold prices broke-down; but making matters more interesting is the fact that Gold prices have been pressing-higher for most of this US Dollar run, with the yellow metal now re-testing a zone of prior support as fresh resistance. Will sellers be able to push Gold prices to fresh lows?

- The US Dollar breakout has continued to run to fresh highs, hard-charging beyond prior ascending triangle resistance with very little pullback. The big question at this point is whether buyers can continue to drive, and below I look at both support and resistance structure after this bullish breakout has shown.

- DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading Gold prices? Check out our IG Client Sentiment Indicator.

Gold Prices Stabilize as the US Dollar Breaks Out to Fresh Yearly Highs

Perhaps it was a delayed reaction, or maybe the earlier-week breakout in Gold was leading the pack; but as the US Dollar broke-out to the upside yesterday, Gold prices cauterized support from the 2019 lows and have pushed back-up into a prior zone of support. The big question now is how aggressive sellers might remain to be; and whether the April bearish theme in Gold prices remains. And in a related matter, given that strength has shown over the past 24 hours in both USD and Gold – might another round of risk aversion be around-the-corner?

Making matters more interesting from a technical perspective: The descending triangle in Gold prices looked at earlier in the month, which will often be approached in a bearish fashion, has led into a down-side breakout with prices pushed down to fresh lows. But the lows this week are coming in around a bullish trend-line projection as taken from swing-lows in August and October of last year. This puts Gold in an interesting spot, as a hold of support at this longer-term trend-line opens the door for a re-test of shorter-term resistance.

Gold Price Daily Chart

gold price daily chart

Chart prepared by James Stanley

Going down to a shorter-term look, and there’s still a case to be made for bearish scenarios in Gold prices, and that will remain until price action breaks back-above the 1280-level, which was the prior swing-high just ahead of that fresh yearly low. A break above that price opens the door for a continuation of higher-highs and higher-lows, at which point traders can more confidently move-forward with recovery themes.

There is another Fibonacci level at 1286.38, which is the 38.2% retracement of the 2013-2015 major move. If prices do strike above 1280, this becomes a possible area for the next resistance inflection, at which point traders can look to catch higher-low support, plotting from the 1275.55-1280 area on the chart.

Gold Price Two-Hour Chart

gold price two hour chart

Chart prepared by James Stanley

US Dollar Breaks Out to Fresh Yearly Highs

The ascending triangle formation in USD that had been brewing since last year has finally given way to a bullish breakout. This was looked at in the Q2 forecast, as the US currency had spent the better part of the past six months digesting into a narrowing triangle.

Just ahead of yesterday’s bullish breakout, I had looked at a shorter-term ascending triangle formation that had built as price action postured near resistance; and that formation gave way to a very strong bullish push that showed yesterday and has continued to run.

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

This topside push in USD has taken-out a number of resistance levels along the way, and the next big obvious spot of resistance potential is around the 100-handle, which is confluent with a couple of different Fibonacci levels. Inside of that, traders would need to reach a bit to find resistance potential, but a prior price action swing-low around the 98.50-level could become of interest, as well as another around 99.25.

US Dollar Daily Price Chart

us dollar usd daily price chart

Chart prepared by James Stanley

On the support side of USD, that prior resistance area from the ascending triangle remains as potential higher-low support. But given the continued drive of this bullish run, another area of interest has appeared. This runs between 97.87 and 97.94, with the former of those prices as the 61.8% retracement of the 2017-2018 major move and the latter as the 23.6% retracement of the 2014-2016 major move.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX




Yen Up Before Golden Week, May Extend Rise on Risk Trends

Fundamental analysis, economic and market themes.

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TALKING POINTS – YEN, BOJ, GOLDEN WEEK, ECB, DURABLES, EARNINGS

  • Yen broadly higher despite mixed lead from equities in APAC trade
  • Divestment before Golden Week holiday may be driving price moves
  • Risk aversion may add to Yen gains. Key USD/JPY support sup-111

The Japanese Yen traded higher against all of its G10 FX counterparts despite mixed cues from Asia Pacific stock exchanges. Performance there often establishes a baseline for sentiment trends that typically drives the perennially anti-risk currency.

It is tempting to pin the rise on the Bank of Japan, which tweaked official guidance to say that the current ultra-accommodative setting will remain “at least” through next spring. That might’ve been interpreted as an awkward stimulus withdrawal signal. The Yen’s rise started hours prior however.

Divestment ahead of the upcoming Golden Week holiday lull in Japan seems like a more plausible explanation. Specifically, the unwinding of carry trade exposure – bets on relatively risky assets financed cheaply in JPY terms – might have singularly stoked demand for the go-to funding unit.

YEN MAY EXTEND RISE ON SOURING MARKET SENTIMENT

A further tailwind may emerge if a committed risk-off bias is established. Downbeat rhetoric warning of slowing global growth in the ECB Economic Bulletin may start this process. US durable goods orders data might help as well if the outcome echoes a recent tendency for results to undershoot forecasts.

The corporate earnings season seems likely to take top billing however. The busiest day on the docket this month will see 62 constituents of the pace-setting S&P 500 index release results. A few standouts aside, the overall tone has been downbeat. More of the same promises larger JPY gains.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

CHART OF THE DAY – USD/JPY CHART SETUP HINTS AT YEN GAINS AHEAD

Yen Up Before Golden Week, May Extend Rise on Risk Trends

USD/JPY technical positioning hints the US currency may be vulnerable to a downturn. Prices tellingly struggled with resistance at 112.14. Now, the appearance of negative RSI divergence marks ebbing upside momentum and bolsters the case for weakness. Confirmation of a deeper down move requires a daily close below rising trend line support set from January, now at 110.64.

FX TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter




USD/JPY Uptrend at Key Resistance Before BoJ, CAD Trims Drop on BoC

Classic technical analysis, macro and economic themes.

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Asia Pacific Market Open Talking Points

  • Anti-risk Japanese Yen and US Dollar outperform as S&P 500 falls
  • Canadian Dollar trimmed losses after BoC dropped its rate hike bias
  • USD/JPY at key resistance in its uptrend ahead of the Bank of Japan

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We’d love to have you along.

FX News Wednesday

Like yesterday, the US Dollar and Japanese Yen were the best-performing majors. These currencies can at times benefit during instances of risk aversion. Wall Street ended the day lower. The S&P 500 fell 0.22% in a day that contained mixed earnings reports from Boeing and Caterpillar with Facebook and Microsoft leading the better-than-expected pack. US front-end government bond prices rose into Wall Street open.

While the Canadian Dollar took an initial hit on the latest BoC rate decision, my index of CAD (see chart below) trimmed most of its losses by the end of the day. While the central bank dropped its rate hike bias, Governor Stephen Poloz reiterated their data-dependent approach during his press conference. In fact, he said that interest rates are more likely to rise than fall if the forecasts are right, undermining cut expectations.

CAD Index: Average Versus USD, EUR, JPY, GBP

USD/JPY Uptrend at Key Resistance Before BoJ, CAD Trims Drop on BoC

Chart Created in TradingView

Thursday’s Asia Pacific Trading Session

S&P 500 futures are pointing a little higher ahead of Thursday’s Asia Pacific trading session, perhaps bolstered by upbeat Facebook and Microsoft earnings which crossed the wires in after-hours trade. If this translates into gains for the Nikkei 225 or ASX 200, we may see the pro-risk Australian and New Zealand Dollars trim their losses over the past 24 hours. AUD/USD was especially weak following dismal CPI data.

At an unspecified time later today, we will get the Bank of Japan monetary policy announcement. Inflation is still well below their desired 2% price target with rates still negative alongside yield curve control measures. As such, their policy-setting tolls are likely to remain unchanged.

But, the central bank is facing increasing external headwinds as Prime Minister Shinzo Abe is expected to deliver the remaining portion of promised sales tax hikes in October. With that in mind, the Yen will be closely eyeing commentary from Governor Haruhiko Kuroda.

USD/JPY Technical Analysis

Ahead of the BoJ, USD/JPY is sitting right under key resistance at 112.31. The pair is being guided higher by a rising support line from the ‘flash crash’ in early January. This comes after climbing above the descending trend lines from the end of last year which has opened the door to testing December 2016 resistance. How USD/JPY behaves at 112.31 may determine its next major target.

USD/JPY Daily Chart

USD/JPY Uptrend at Key Resistance Before BoJ, CAD Trims Drop on BoC

Chart Created in TradingView

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter




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