Monday, May 26, 2014

Gold Technical Analysis: bearish pennant | Time to look at a Scandie

Gold traders have been in a period of indecision for the last few weeks, as indicated by the pennant that has formed on the weekly chart above (Price converging from both high and low to form the tip of a triangle). The fact that the rate was in a dominant and pronounced downward trend prior to that is a signal that it will continue in that direction as soon as the tip of the “pennant” is reached, according to classical Technical Analysis theory.

Fundamentally, the elections in Ukraine seem to have gone well. An apparently strong candidate with good parliamentary experience has been elected president with a decisive majority in the polls, or at least in those parts of the country where polls were allowed to take place. That there seems to be a significant military battle raging over control of the airport in the city of Donetsk is not comforting, but the markets can be quite discriminating about matters such as this and the distinct impression we get from our sources this morning is that the geopolitical crisis that has been Ukraine is, for the moment at least, off the front burner as far as those participants who have an interest in gold as a “safe haven” are concerned.

The Norwegian Krone

The currency of Norway is dependent on both the price of oil, that country being a significant producer, and the interest rate differential against other countries. According to a study by the Economics Department of Norges Bank, international financial turbulence also has a disproportionate effect on the Krone, while in the long term its value can change due to price differences between Norway and its neighbours.

We have decided to make the USDNOK pair, known in the Forex market as one of the “Scandies”, one to watch. We believe this is a good time to initiate coverage, given that the international price of oil is relatively stable at present.

Right now USDNOK is in a downtrend, signified by the lower highs and lower lows on the daily chart above, and the fact that the rate is below the 200 Day Simple Moving Average (SMA, blue curve on the chart).

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