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.
The low-volume rally I referred in my last post was indeed weakness, and the prices quickly rejected the trendline. Since there wasn’t a bullish test or strength above the trendline, there was no confirmation; the strong signal was formed below the trendline, which means it could be buying from traders buying at the broken trendline (in analogy with the commonly seen demand signals near an important support). The prices continued to drift downwards, and the market is now rallying, yet again on low volumes. I only kept the older trendline for reference, as there’s another one validated with the last high, which is the one that should be used.
Eventual shorts should be taken nearer to the trendline, though with the recent strong signals at this price level, I want to see weak signals with significant volumes first to prepare for a short trade. On the other hand, a break of the trendline with good volume would be bullish, given the strength behind; the background should also change accordingly.
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.
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.
GBPUSD is trading near a support formed at 19th May, and is also near an up trendline coming back from 20th April. After the Pound bull market being stopped by professional selling around 1.578 (purple signals), and consequently going into a correction, more recently it has seen buying at this level. This may mean this is actually re-accumulation, and so the bull market may be sustained. The background reflects this and it shows up as strong.
If prices stabilize in a few more bars (i.e. they don’t make lower lows), and make a higher high, there is a potential long entry in a down bar. Meanwhile it’s important to notice that there is another validated trendline, to the downside. So if prices break the support, and the background keeps being strong or neutral, I’ll look for a strong signal near the lower part of the channel.
