Gold (XAU/USD) and Silver (XAG/USD) are naturally, two very correlated commodities, and the recent action is no exception.
Gold is near a support and a previous broken trendline. There was recent strength (blue signal) with moderate volumes, in an area of previous strength, which could be the first signal the support is holding, but so far the market doesn’t show signs of stabilizing – it keeps making new lows, and the background is still weak.
Silver is too near a support, and in the mid of a down trending channel. Given the price range silver showed today, and the fact it broke a previous support at 15.8, it was expected that the recent strength has higher volumes than in gold, since more traders and stop-losses were ‘shook-out’. Like gold, it’s making lower lows, and the background is still weak mostly due to the downtrend. I would like to see a rally to finally break the downtrend and confirm the recent strength was in fact accumulation; if the downtrend is to continue, it’s probably going to test the demand at 1162 in gold, which occured in early June. In the case the market rallies and it gives an opportunity to enter, I’d be more inclined to invest in silver rather than in gold, or at least to have a larger position in silver, as XAU/XAG (Gold/Silver ratio, tradable in some brokers) is showing major selling, which it’s preventing it to break a key resistance.
Euro/Pound has seen massive buying around 714 price level, seen by the green signals and very high (red) volumes that accompanied them. The trendline is coming from 10th June, and has been recently broken. The prices also went below the 61.8% Fibo, levels used by retail traders that are usually shook-out for stop-losses on long positions by the smart money. The volumes on the up bars, however, are low (yellow in histogram), which doesn’t seem to be strength after such an heavy professional support that there was before. Perhaps the smart money isn’t interested in higher prices right now, and they either need to buy more to support an uptrend, or they need to see there isn’t significant supply (by a bullish test at a lower price), or it’s just a temporary weakness. I’m therefore looking for the prices to go lower and test the supply there, or waiting for more strong (demand) signals. If they go up on high volumes (above average) that would also be a confirmation that the trend is changing.
Prices are just now breaking-out the resistance at 191.93, formed at 5/June. The background is positive, though the market has been on a strong trend for 3 days now, so a pause after the break-out is likely. I want to see a good volume on the break and a test bar (gray histogram bar) afterwards. Given the circumstances, it’s likely the market will have to be shaked-out, with prices coming to 191 2 price level, so the stop-loss can’t be too tight.
Like I wrote in the previous post about USDCAD, there was an high chance of a false break-out of the 1.253 resistance due to the weak background, and previous supply signals at that level, meaning it was a likely distribution level. The candle that took prices above the resistance, yet closed below it, due to selling pressure, was a good confirmation of the false break-out and hence a good spot to short. Closed the trade after 2 bullish congestion zones.
This pair has been showing significant supply at 1.25 and up, with no previous resistance, which means it isn’t overhead supply (which is usually not something to worry about). The most significant resistance is at 1.25369, which is the high of the previous supply bars. There is a trendline coming from almost the beginning of this rally, since 12th May, which is the level to watch for an eventual short trade.
There is a high chance there will be a fake break-out, in order to get more longs trapped and to catch the stop-losses of shorts, which would confirm that this is in fact distribution. This would be a break-out with either low volume, or a break-out with supply signal right above the resistance after it was broken. To the downside, a break-out of the trendline with good volume would be a trend change signal, if the background keeps at being weak, and given the weakness behind. At the moment the pair is making successive higher lows, which means that for now the prices are being supported, and the dynamic trend is giving the same indication as it’s still up.
Brent crude oil, which is related to the Canadian Dollar, as Canada is a big oil exporter, is on the lower part of the trend channel, and recently showed a demand signal, at a previous strength area. It’s not showing the sideways movement as USDCAD is though, so I’m waiting for prices to stabilize at this level or to make a higher low, and for the background to change to strong.
GBP/USD
In GBP/USD there were multiple demand signals near the lower part of the channel, but since their lows weren’t sustained for much longer, this wasn’t accumulation, but rather take-profits on short positions. My trade ideas in H1/H4 are either to wait for prices to get near the support at 1.508, or if prices sustain the most recent lows, I can start thinking of the most recent demand signals (with a very high volume red histogram bar) as accumulation, which could change the trend. A selling climax, a wide-range candle making lower lows with extremely high volume, and which Analytical would mark as Major Demand, could also mark the end of this trend.
EUR/USD
EUR/USD on the other hand, already paused the downtrend ahead of the Pound, and more demand signals above the support at 1.081 would be a sign of accumulation (= long-term trend change). This could be bullish for GU as these usually go hand in hand.
In the most recent EUR/USD rally there was a short opportunity, at Thursday, as the background was weak and there were many weak signals, which made a significant downtrend very likely. Looking back, the major trend was still down, despite the pause at 1.08, and there was another important factor going on: the volumes of the most recent demand signals were surpassed the volumes of the most recent weak signals, which was an indication the rally was about to fail. The close was on a strong signal after the Dynamic Trend had already changed to up.
