Gold And EUR/USD: Our Two Favorite Subjects

This week did not have much action in EUR/USD, but the levels that were tested and held were important levels. As is typical of August, the markets feel tired. Many of the senior dealers at the large money-center desks are on holiday and the junior team has been told, “DO NOT TAKE RISK”. So they take the client orders, and quietly offset into the marketplace, doing their best not to effect the market.

Ever since the NFP data release on Aug 7, market sentiment has been changing towards long USD positions. As we have noted repeatedly, the Shanghai Indice has been very weak since the end of July which we believe is an indicator or risk aversion. If this were any other month than August, we would have seen much harder runs at the important EUR/USD levels of 1.4020 and even 1.3840. But it is August and the volume of large “real money” orders is just not there. So we had just one run lower in EUR/USD and it was a weak one at that. But importantly the 1.4020 level was not breached. Throw in the Warren Buffet Opinion piece in the New York Times and we had a great week for the few remaining EUR/USD bulls like us.

As a intraday trade we would normally not put on positions for a short term trade on an Friday in August, but we feel that this one is worth it…..Sell USD today for a late day drop. We sell USD/JPY at market (current bid 93.67). We will close the position towards the end of the day.

Final note is a technical view on GOLD (current bid $954.30). The chart below shows a tightening wedge since early this spring. As we have stated for a long time….we expect a break to the upside that will crack and hold the $1,000 level on its way to new highs in the coming years. On a short term basis we would use a Buy Limit order just below the midline on the below chart with a Stop Order on a daily close below the bottom channel and a target above the channel top. We will put in a Buy Limit at $947.50 with a Stop Order upon a daily close below $930.00 and a target level of $979.00.

Stay Nimble!

Thanks to FX Solutions for the below image.

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