USD finds some ground as gold slips

20 February, 2018

The Yen has been one of the most aggressive movers from the previous week and markets are looking a little uncertain heading in to this week. As the USD continued to show weakness markets were quick to jump into the safety of the Yen as it continues to remain a favourite for safe haven traders, especially as the Japanese economy is not experiencing any major inflation at present. It's also a light trading week for the US economy, but USD bears and bulls will be focused on home sales m/m and of course the FOMC minutes, with some hoping to see a more hawkish stance from the Federal Reserve. The question is how many moves does the FED expect to make this year and what impact it will have on the USD as a result.

For the USDJPY traders have been very bearish, but the start of the week has seen a small bounce - compared to previous candles. Support at 106.063 has so far been holding back any further movements and it will be interesting to see how it holds out for the rest of the week. If we do see another extension lower the next level can be found at 105.298. The market while bearish can get a reaction from the Bank of Japan though, so it' worth noting that as it gets to low we may see some intervention. On the bullish side resistance can be found at 107.287 and 108.281, but the main focus will be of course on the 107.287 level as a bounce here lower could get the bears flooding back into the market and looking to take things lower than before.

I spoke highly about the potential for gold earlier in the week and it would seem that the bulls are not as keen as before, but there is certainly still potential there. Despite the inflation worries globally for a number of key economies, gold has failed to make a higher high on the daily chart. This shows to me that the bears are still at work here and the bulls are not so sure of themselves when it comes to moving higher. Ideally, I would like to see a higher high before confirming that the bulls are looking to take control. However, until we do see this I believe we may see some bearish movements lower as gold traders look to take some profit.

Gold has slipped past resistance/support at 1349 and is looking weaker as a result. I would anticipate it moving lower to 1336 on the next leg with the 20 day moving average likely to also potentially act as dynamic support. Further legs below this are likely to find hard support around 1326 on the chart. If we are to see higher highs then we would need to see gold extend higher on the charts to 1357 with the need to breakthrough 1365 to confirm the bulls are back in control at this stage.


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