Thursday September 9, 2010 - 03:20:22 GMT
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Gold Chart Pattern Indicates Impending Break
December Gold futures declined from their high late
Wednesday to finish lower for the day. Good news from Portugal helped
alleviate European bank concerns and stronger demand for equities helped draw
money out of hard assets, sending Gold futures lower.
Earlier in the week, Gold soared on European banking
concerns and economic growth worries, encouraging investors to treat gold like
a safe-haven investment.
Todayâ€™s action in the Gold market suggests that the movement
in the stock market will have a lot to do with its short-term direction. A
rally in the stock market is likely to send Gold sharply lower as the two-asset
classes resume their fight for investment dollars.
Technically, Wednesdayâ€™s closing price reversal top has the
market in a position to break further to the downside. Based on the short-term
upswing of $1211.70 to $1264.70, traders should watch for the start of a 2 to 3
day break to $1238.20 â€“ 1232.00.
The U.S. dollar trimmed a little of its losses late
Wednesday after the Federal Reserve's Beige Book cited a slowing economy and
limited inflation pressure. Most of the damage to the Dollar was done earlier
in the session, however, following a strong Portugal Bond sale and amid better
news out of Canada and the U.K. Greater demand for riskier assets as
evidenced by the strong rise in U.S.
equities also contributed to the bearish tone affecting the Greenback.
Ahead of the release of this afternoonâ€™s Federal Reserve
Beige Book, U.S. Dollar was trading weaker against most major currencies. This
report wasnâ€™t expected to be a market mover, but traders were likely to read it
to gain a little more knowledge into what the Fed was thinking when it made its
recent Federal Open Market Committee decisions.
The Japanese Yen was under pressure versus the U.S. Dollar
after rising to a 15-year high against the Greenback. Strong moves in the
equity markets helped to revive the carry-trade too. The Yen also took a hit
this morning after Japanese government officials expressed apprehension about
the rise in its currency.
Technically, the September Japanese Yen formed a closing
price reversal top. This pattern, if confirmed, often triggers the start of a
two to three day correction with a minimum objective of 50% of the last swing
up. If this is the case this time, then look for a short-term retracement to at
least 1.1877 or maybe as low as 1.1831.
The Japanese Yen chart will get most interesting if 1.1867
is broken. At this time, the Yen is set up for a weekly reversal, but a close
under 1.1867 will put the market lower for the week, forming a possible major
Last week it appeared that conflicting forces were going to
keep the Japanese Yen in a tight range, but after todayâ€™s action, it is clear
that the USD JPY has a chance to make a tremendous rally if the Japanese
government continues to threaten action against a strong Yen and if trader
appetite for risk continues to grow.
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