After doing roughly 900 ticks in almost one way traffic since the 1.0570’s in April, you have to wonder whether there is going to be a pause in the trend and maybe some correction.
If we think back to how gold reacted after it’s big fall then we can possibly get a clue what to expect i.e a big fall then a retracement, which petered out and then the fall resuming.
All good rallies and sell off’s need to have a clear out along the way before resuming. Players lock in some profits, specs try to pick a bottom and the general market adjusts positions.
It’s the actions we see in these pauses that tells us whether the trend is to continue.
The pair bottomed out at 0.9710 which was into support and a trend line in and around 0.9700.
We spent the rest of Friday floating around the 0.9735-50 area and we’ve bounced today up to a high of 0.9792. I would expect there to be some selling ahead of a retest of 0.9800 while the previously broken trend line at 0.9873 will act as resistance also.
The first big test, should we go higher will be the 38.2 fib from the Apr/May hi/lo at 1.0042. If this holds then the sellers will be feeling comfortable that they remain in control and the trend lower should continue.
I still firmly believe that the trend is lower especially with the ACB’s seemingly turning tail on their previous buying strategy.
I got out of my short last night at 0.9740 as I didn’t like the overall USD price action especially in USD/JPY. I will look to go short again in small increments at 0.9800, 0.9873, 0.9900, around the 38.2 fib and finally around the 50 fib. My stop for those trades will be just over the 50 fib at around 1.0160/70.