XAUUSD D1 01 18 2022 1928

 

The outlook for gold remains mixed to negative with the precious metal expected to remain within a $1,763/oz. to $1,837/oz. This multi-week range will likely tighten over the short-term with the Average True Range indicator (ATR) stuck at a near two-year low, highlighting the lack of volatility in the market. The current moving average set-up is also mixed although a bearish form a couple of days ago, adding a layer of bearish sentiment. On the downside, $1,800/oz. guards the January 7 multi-week low at $1,783/oz. ahead of the 50% Fibonacci retracement at $1,763/oz.

 

 

 

 

 

USDCAD D1 01 07 2022 2119

Expectation on  the Canadian Dollar to be extremely sensitive to the upcoming key data releases, given the aggressive hawkish pricing for the BoC. As well as the fact that money markets are pricing a 65% probability for a hike at the January meeting, which is tough to see at present, given recently announced lockdown measures in Ontario and Quebec. Meanwhile, the BoC also maintained their guidance at the December meeting, by reiterating that they will not raise rates until the middle quarters.

 

 

 

USD/CAD has been a tough handle as of late with see-saw price action since the beginning of the month. First, there was the big drop from resistance which hinted at more weakness to follow, but this was not to be the case as the down-move has been quickly reversed the past week. The rapid rise has brought significant resistance back into play, with the area around 12807/54 a difficult spot for USD/CAD. We can see high or closing prints gathered in this zone back to July. Chasing this up-move here, even if we see a breakout, appears risky.

Preferably we first see sideways price action develop around resistance prior to a breakout. It would mark a change in character from other times this zone has been met. Previously, there was a sharp turn lower within a couple of days of meeting resistance. If this time around we were to see price hold, then a base could develop that will lead to a sustained breakout and a formation from which to assess risk on new long entries. 

USDCAD D1 12 14 2021 1702

 

Even if the ideal scenario plays out, we get a base from which an entry can be taken, the trade higher may be short-lived before another major level of resistance causes problems. The 12950 level is a big one. It dates to prior to the onset of the pandemic, with its most recent validation coming in August. For those looking for a quick-hitter off a level, a near-term short could develop on another failure from around 12807/54. But given the recent higher-low the trade may not develop very far. Overall, in this corner, the tactical outlook is neutral until further price action can provide clarity.

 

 

 

 

 

The US Dollar Index (DXY) coiled up tightly from November 24 until yesterday, a USD theme that has been discussed regularly the past few days. The confluence between the apex of the triangle and CB activity, starting with the FOMC yesterday, made for an interesting confluence.

The spike higher and reversal candle from the top of the formation is finding more momentum on the downside today with the help of strength out of GBP and EUR on CB policy meetings. Today’s decline has the ability to bring a bearish trigger by declining below the lower trend-line of the triangle formation.

These fake-out breakout type scenarios can be powerful in their own right due the crowd getting trapped on the wrong side, but helping cement this is as the case this time around is the fact that the bottom trend-line of the wedge is also strong slope support running up from June. If that breaks, not just a pattern triggers, but significant support breaks as well.  

USD

 

A close below 95.84 will mark an important lower-low in the near-term as well that will further confirm any breakdown we may see here today, tomorrow. The first meaningful level of support to watch is the triangle low at 95.51, but if the fake-out is to hold its weight then we are likely to see lower levels than that.

The next big level of support doesn’t arrive until down around 94.67, a level that began with the March 2020 low (an important one). It could very well be in confluence with the trend-line rising up from May, so if we reach that point it is likely that support holds, initially.

Before getting too bearish, though, it is preferable to see a solid daily closing candle that ends near or at the lows of the day and below the line of support mentioned above. If we see a reversal today that puts the DXY back above support and leaves a candle with a relatively long wick, then the bearish outlook will cool until we do see a confirmed breakdown.

 

 

 

 

 

 

 

 

 

 

Silver has been weak, and broadly speaking it has been quite a bit weaker than its big brother gold. Yesterday’s sell-off from a small congestion pattern has silver even more firmly probing major long-term support.

The area from around 22.46 down to 21.42 has been meaningful since September of last year. We have seen a few sizable rallies develop from this zone of support, keeping the nearly 17 month-long sideways range intact.

Support is support until it’s not, and on that it should continue to be respected. It does look like it is going to break, but then again it appeared similar in September when momentum was fiercely negative. If a sharp reversal develops soon, then the outlook could turn positive in the short to intermediate-term for continued range activity. 

XAGUSD D1 12 10 2021 1728

If we see a firm close below 21.42, especially on a weekly basis (which could happen today), then while it could be a false break we will have to seriously consider that the bout of weakness recently will continue for the foreseeable future. The 2019 high at 19.65 will be the next major stop to watch.

From a tactical standpoint, existing shorts may want to give silver some room here to see if it can’t break major support. It could provide an opportunity to extend an already good trade. If a reversal happens, then buttoning up on trailing stops may be prudent.

For would-be shorts, a break and then failure to rally back immediately may offer a nice set-up from a risk/reward perspective. Would-be longs will likely be best served waiting for a strong reaction higher off support before initiating bullish wagers.

 

 

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