Gold Rallies On Renewed Reserve Currency Talk

The hot summer seems to be affecting traders’ judgment; yesterday poor jobless numbers saw shares end higher. The move continued in early trade today, but higher income and confidence numbers saw markets spinning lower.

Gold and oil took good bids this morning after renewed Chinese calls for a new reserve currency hit the Dollar. Gold stuck its nose above the downtrend line, but for me it needed to break and hold above its 21-day moving average. This didn’t happen and with no further weakness in the Dollar commodities lost their bid.

Yesterday I made money by shorting GBPUSD; today I added to the pot by trading long. The gains weren’t as much today, but considering the lack of time I spent monitoring the deal I was more than happy with the outcome.

My brother was on a rare visit so sitting hopefully at my screens seemed more than a bit rude. I managed an early scan of the markets before breakfast and watched Sterling gently pullback from the gains it made on the latest reserve currency chatter.

5-minute chart

I wasn’t convinced by the sell-off, but didn’t fancy buying a falling currency. The price had just dipped below its 21-period moving average and was threatening to dip below $1.64 when I got the call for breakfast. I decided to set a limit order to buy GBPUSD at $1.6423; this was 10 pips above the 21-period MAV on my 5-minute chart. Using the ‘If Done’ option I stuck in a stop loss at $1.6390 and left the markets to do their job.

Just like yesterday, the trade worked well in my absence. I nipped up ten minutes later to see how things were going and was welcomed by a screen showing GBPUSD soaring at $1.6490. I closed out part of the deal immediately, hitting a $1.6485 bid and trailed my stop up to $1.6453. Had I been at the desk I’d almost certainly have taken my first profit at $1.6453, locking in 30 pips. By not being there I gained an extra 32 pips.

Today’s trade didn’t get the rub with the stop loss and I was closed out a while later at $1.6453, but that’s OK; it’s been a good end to the week.

The major currencies are still confounding most traders though I sense a return to looking at a weaker Dollar trend. The trading ranges on both major Dollar crosses are narrowing and the 21-day MAV is providing solid support to Sterling. But that’s one for next week when, hopefully, we’ll get more idea of where equities are headed.

If you’ve seen all the recent talk in the press about bonds, yields and auctions, but don’t have a Scooby Do what it means, check out our piece on What Are Bonds?

Here’s hoping the Lions grasp the nettle tomorrow and square the series for a climatic final test in Jo’burg.

And finally, Ronaldo’s signed a new sponsorship deal, but did he notice the subtle message?

Have a good weekend

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