Saturday, June 10, 2017

Two Trendlines To Pay Attention To This Week

The Japanese yen and Gold have gone hand-in-hand most of the year, in other words their moves have been highly correlated or directly inversely correlated, depending on how you look at it. More importantly, the two seem to be flirting with key trendlines, which if either are broken, could have huge ramifications for global markets.

Gold futures are testing a huge (down) trendline that goes back roughly 6 years ago during the end of the great bull run that the "yellow metal" enjoyed over several decades. The monthly chart shows several relevant touches, most recently last July when gold prices drove to 1375 (an exact Fibonacci retracement of the prior decline) and failed.

Since then, Gold has gyrated in a large range, but is testing the psychological 1300 region, which has capped now twice over the past few months. Depending on how you draw trendlines (I tend to intersect as many price points as possible), the trendline on a daily chart basis has been broken but failed to hold. The ensuing decline, however, paused exactly at a 38.2% fibonacci retracement level and the 20-day MA (which can be seen in the daily chart below).

On a monthly chart, bulls have only managed to probe the trendline, failing thus far on a monthly closis basis. If risk aversion increases as seen by various metrics on Friday, Gold could easily break and close above the monthly trendline. With political uncertainty and a lot of the month of June still to go, we'll have to monitor closely whether this calls for an upside breakout or whether this trendline stays in-tact.
The Japanese yen tested a key trendline last week too, but not nearly on the scale of gold's long-term down-wardly sloped trendline. On Friday, the USD/JPY touched this line for the third time, thereby validating a 1-month bear trendline.  This also occurred, co-incidently, while Gold was retracing its move off the recent cycle's high and bottomed (for the time being) at the 20-day MA and a key fib retracement.


Unfortunately, both these trendlines will not likely hold up due to the way the correlation between the two (Gold and yen) have held for some time. That said, a break in either of these trendline situations is likely to not only affect the other, but also have impact on all markets given the importance of both of these technical formations. PR

Weekly Futures & FX Positioning Report - August 20, 2017

According to the latest COT (Commitment of Traders) report (as of August 15th), the most significant move in the FX futures positioning w...