Thursday delivered rather big moves as patterns resolved to the norm all over the place, spurred on by a stronger than expected US retail sales report, and no small amount of expectation this was coming no doubt. More interesting than the big sell off in Gold and forex Thuesday will be what happens in the immediate few days…
Forex
GBPUSD – breaks down out of the later triangle, after failing to regain levels above the broken trendline earlier in the week. Note ADX is starting to curve upward from low levels, the makings of a trend are here.
USDJPY – rumours of Yuan revalutation had been lending additional support to the Yen, and this quickly undone today, keeping a pattern of higher major swing lows and highs for the USD-JPY pair intact for the time being.
EURUSD – hit its lowest level in 2005 today amid generally pessimistic news.
Gold
With such important patterns breaking down in major currencies it was inevitable that Gold should sell off, all day long, and so it did:
Gold, Continuous Contract – Daily: broke down out of the decending triangle. For the next day or so we’ll be watching for weak bounces under which we’d want to sell (or sell the gold stocks) but also for any surprise push back into the pattern above. Occasionally when a pattern completes or breaks down on news, the trade everyone expects to work fails.
Last year I wrote that Gold rallies historically last 2 – 3 years with long periods of drought; this current rally was then already far older than that, and has aged yet another year. While there area many arguments that suggest the USD should weaken and Gold therefore benefit, I prefer to keep the historical context in mind and trade in and out gold rather than believe in it as a magical store of value.
There will be another time to be long the group, but it certainly wasn’t the time to be long on Thursday.
05.05.12 23:24 #