The Japanese currency is currently in an insanely tight range. Minute chart for last 6 hours, taken at 17:20 GMT +1
Breakout anyone? Note also the quick followup trade after 77.6. Why? Well, 50% of the record-low-to-post-intervention high!
The extremely tight range of the last three – four hours, and the pretty solid late bullish breakout trap at 16.55 speak for themselves Now, a breakout to the bottom, putting 77.6 under attack, would that be enough to break it? Updating to adjust for writing time, but the push seems to be upwards now, although highly hemmed in… lets see what happens if it goes down slowly and we can expect a negative Bollinger band expansion overnight to make the Japanese fear going to sleep.
Our shiny little metal is acting as consistently as can be expected of a safe haven. Lets look closer:
The main takeaway from this chart is the impressive price action related to the 20 EMA, and how well it responds to the Bollinger bands as well. 60EMA/SMA combo are also going strong, looking good all in all, again, fundamental picture is king. Now, we are seeing a tighter range around 1800, which is reasonable given previous price action. So, what is the breakout catalyst I am looking for? Besides a pure 20 EMA push here, which is unlikely as it is for good reason flattening out, the other thing is if the shorter term range expands, and that can’t happen until shorter term MA distance becomes longer to force a separation of the bollinger bands on those frames to lead the longer ones. So, with that aid:
I can probably wait for a while longer, but positive price action above the 24 hr EMA is likely to precede some pretty decisive runs (remember, we are in a rather crowded technical area, so don’t expect strong dollar-denominated runs, crossing 1815 – and every dollar from there to 1825 – is an impressive win). Information over inflation.
So, one question: Why hasn’t gold ran like never before? Read the paragraphs below, and see the connection.
Looking for something to short, can’t make your own analysis due to time constraints?
No worries! Attentive picture clickers might have noticed this, but Goldman Sachs has you covered! Pretty impressive opportunity, right? Sold at market price showing a 6% premium, a pricing parked at the post-mid-August top, and a near touch of the 126 Day SMA (half year). There is a monthly/quarterly bullish cross, which could counteract, but with a shaving of 2.5% off stockmarkets worldwide… do you really think that is going to be enough? The stock has impressively outperformed BOC, and I don’t really know why… they’re both backstopped by the Party anyway, right?
What can we expect the secondary effects to be? Well, given Goldman’s unhedged European sovereign debt exposures to the tune of $700 mn, and total exposure to $2.3 bn and 21 trading day losses this quarter (which is rather incredible given the Fed support these guys have) I guess they will need an additional few hundred million to pay out bonuses safely off their 50% gains… (ICBC sales total $1.1 bn) wait, that was from the market bottom! Still a hefty profit, but it probably says something about the funding requirements at the moment. For now, wait with shorting Goldman and go for American financial companies that don’t own Huijin Investment-backed banks.
Returning to the question above:
So, what does this imply for gold? Well… Goldman Sachs is selling off a China-insured investment, after they release good inflation data which is like official mandate for stock markets to rise, and you have Jeffries feeling the pinch of the MF Global squeeze. European liquidity could be frozen solid any minute now… so why not cash out where you can?
Gold is one such place, and that is probably why it seems to have a minute-to-minute correlation with other risk assets: a lot of traders are keeping a lot in gold, ensuring that it forms a rather fundamental position in trade entries and exits. This makes it rather difficult to call the future for gold, with the short term and long term mismatch, but this could indicate opportunities if risk asset prices fall quick enough or people urgently need to reposition out of government bonds. For the time being, long gold, short risk, low leverage or wide stops. This will change when I figure out exactly what happens on the short-term markets…