Gold Makes Tentative Breakdown Move

Gold (daily chart) as of Tuesday (10/18/2011) has made a pronounced drop below its wedge pattern consolidation, which hints at a potential continuation of the bearish run that originated from the early September all-time high around 1920. This wedge pattern, which can also be considered a large inverted pennant pattern, represented a slightly bullish pullback consolidation that occurred after gold’s plummet down to the 1532 low extreme back in late September. After that low was hit with a strong hammer candle, price consolidated into a tight and converging three-week pullback move (that conveniently rose to around the 38.2% Fibonacci retracement of the bearish run’s high-to-low), before making the current tentative breakdown of the wedge pattern. Further downside momentum on the current bearish move could go on to target the 1550 support region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

USD/CHF Stalls Above Key Support within Uptrend

USD/CHF (daily chart) as of Monday (10/17/2011) has stalled above key support in the 0.8900 price region, emphasizing this level as the current price region to watch for key events to occur. At the moment, that key event has been a slight bounce that has highlighted 0.8900 as the most important support/resistance area within the context of the current bullish trend that has been in place since the early September breakout above the previous long-term downtrend. 0.8900 has served several times in the past as a turning point both as support and as resistance. A continuation of the current uptrend would be the likely bias if price is able once again to reach towards its strong upside resistance target around 0.9300, which is another key support/resistance region that price respected in early October, less than two weeks ago. If instead there is a strong subsequent downside break below 0.8900, the current downtrend will have been placed in serious danger of trend change, with the next major downside target around the equally strong 0.8550 support/resistance price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

EUR/USD Turns Down From Resistance to Target Potential Bearish Continuation

EUR/USD (daily chart) as of Thursday (10/13/2011) has turned down from key resistance in the 1.3830 price region. This occurs after more than a week of strongly bullish price action that has formed a significant bullish correction within the context of the new overall downtrend that has been in place since the breakdown below 1.4000 in early September. The 1.3830 resistance level, which was just hit on Wednesday before turning back down in Thursday’s trading, has served as a key support/resistance level in the recent past. If price action continues its bearish stance after having turned down from this resistance, the next key support level to watch to the downside continues to be the 1.3500 price level. In the event of a breakdown below that level, the key longer-term target on a downtrend continuation continues to reside around the important 1.3000 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

Gold Struggles to Recover

Gold (daily chart) as of Wednesday (10/12/2011) has continued its struggle to recover from the precipitous drop that brought price down from its latest all-time high of 1920 in early September down to a low of 1532 in late September. That three-week plunge of almost $400 culminated in a large hammer candle right down at the 200-period simple moving average support, indicating a temporary price failure to further its plummet. Since that candle formation, price has essentially consolidated sideways with a slight upside bias. This pullback/consolidation has formed a rising wedge-type pattern that may also be seen as a large pennant formation. This consolidation pattern would fulfill its role as a continuation pattern if there is a break to the downside below the bottom border of the pattern. In this event, the key initial downside target resides around the 1550 price region. The key event that could presage a recovery of gold and a potential resumption of the long-term entrenched uptrend would be a breakout above the 1730 resistance region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

AUD/USD Tentatively Respects Parity

AUD/USD (daily chart) as of Tuesday (10/11/2011) has tentatively respected key resistance around parity (1.0000), turning down in trading on Tuesday after rising just a few pips above the parity level. This occurs after five straight days of net bullish price action that saw price rise steeply from its 0.9400 support level. Despite these past five days of bullishness, the pair still resides within a strong downtrend, although any subsequent breakout above parity could potentially place this bearish trend in jeopardy, and would then target key upside resistance around the 1.0200 price region once again. If price continues to respect parity within the context of the current bearish trend, price should initially re-target downside support around the 0.9700 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

Charting the Majors with James Chen – Thursday at 9:30 AM ET

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USD/CHF New Bullish Trend Targets Higher Highs

USD/CHF (daily chart) as of Wednesday (10/05/2011) has continued to display a strong bullish bias in line with the new bullish trend that has been in place since the prior long-term downtrend was broken to the upside in early September. After that trend breakout, the new uptrend has been displaying the characteristics of a well-formed and technically-behaving bullish trend, reaching for progressively higher resistance levels while retracing back down to key support levels. These retracements and trend continuations have taken the form of at least two flag continuation patterns that have proven useful in describing the current bullish trend. Most recently, after having broken out above key 0.8900 prior resistance, price action pulled back down to bounce at that level, this time as support, and is now targeting its current immediate upside target around the 0.9300 resistance region. On a breakout above 0.9300, the next major upside resistance target resides around the 0.9500 price region, which not only represents an important prior support/resistance level and psychological price level, but is also around the 161.8% Fibonacci extension of the last major bearish run.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

Ask the Chartist with James Chen – Webinar Rebroadcast

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