Thursday, August 22, 2013

Gold is still in a downtrend

It is a little while now since Gold broke through its well defined support at 1554 USD per oz. Since then it has bottomed out and retraced, but only after what by any standards was a precipitate fall to 1180. What looks like an overreaction at that stage is now being corrected.

The US economy is growing, at long last. The Federal Reserve is  has the power now to put through, albeit with some difficulty given its fears about volatility in the markets, particularly in bonds, the measures that will lead inexorably to the removal of the Quantitative Easing that has weighed on the US dollar and made gold the ultimate safe haven.

From the Technical Analysis point of view, participants will be watching for a possible end to this retrace when the price approaches the trend line in the above chart.

Last January gold finally went below its 200 Day Simple Moving Average (SMA), after flirting with it for a period prior to that. It is now approaching it again from the downside, where it can be expected to provide some significant resistance.

Regular readers will know that the 200 day SMA is one of only a few traditional technical indicators we have respect for at Omicron Forex. It is also worth noting that the trend line shown on the larger scale chart at the top is not a million miles away from the 200 SMA on the daily.

What does all this mean for currencies?  Well, the Aussie dollar is in the firing line, for one. Interest rates Down Under have been so elevated that the only real way is down for the AUDUSD pair, particularly given the resurgent US dollar. The Euro seems to be supported at around the 1.30 USD level, probably by the intervention of the European Central Bank (ECB).

We have set the
 Omicron Forex Silver Trigger algorithmic routine to take short trades only. Remember we are dealing in probabilities here, as always, and right now both the stats and the fundamentals favour short trades in gold.

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