Weekly Price Action & Ichimoku Outlook Aug 12th – 17th
After the massive losses in the Euro from mid-April to mid-July, the pair has been forming smaller price spreads (in the downtrend) while the bulls in the counter trend move are starting to out strike the bears. This to me is suggestive of an exhausted 3-mos down-move finding no new bears (at the moment). This has led to the bulls demonstrating some ability to take short term control as they continue to build higher lows and higher highs with greater volatility (meaning greater participation from the bulls).
We are though in a channel for the last 3 weeks which is relatively structured, offering plays for bears and bulls (slight edge to bulls for now short term).
Why do I short term favor the bulls?
Well, since the start of this channel on July 19th, out of 17 days, there have been 11 bear bars printed with 6 bull bars, yet the prices are printing higher lows and higher highs, communicating who is in control. Thus, if you are playing intraday, you are more likely to profit on the bear side, but with less profit. However if you are playing the bull side, you have a greater chance of more profit, but less opportunities probability wise, so pick your tonic.
Bulls can watch for plays on the lower end of the channel around 1.2215/20-ish while bears can look for plays around 1.2450 which is a nice role reversal level, and 1.2500 being the projected channel top and round number.
After an impressive 2-mos climb of 1000+pips from the pin bar off .9600 to the 1.0600 figure, the Aussie appears to be in a re-distribution phase minimally, and possibly running out of steam. Although the Chikou is clear of the Kumo, and the Tenkan and Kijun are in strong trending order, the last several days have been unimpressive from both sides of the market. With the bulls in control, and the bears providing very little push back, why haven’t the bulls capitalized and taken out the recent swing highs at 1.0612?
Although price action has formed a pin bar off the tenkan, it still needs to clear the 1.0612 highs before attracting any new buyers. If the pin bar lows and tenkan fail to hold with a daily close below 1.0500, I suspect we could see a pullback towards the Kijun at 1.0350 before bulls come back in as there doesn’t seem like much enthusiasm at these levels. It should be noted that since price has been above the Kijun back in early June, this is the second longest flat period for the Kijun. But this time, it is happening with declining volatility so a pullback seems natural at this point.
Stuck between the $1630 and multi-year support at $1530 since May, the precious metal is making a case for a potential upside break in the near future. From a basic price action perspective, the upside level continues to be attacked (4x since May) while the downside level has only been attacked (3x) and it was all done in the month of May. Since then, the metal continues to build higher lows and sharper price action angles on the downside, which is definitely putting pressure on the bears holding the defenses at $1630. The last pullback rejection from $1630 only sufficed one day below the 20ema, and has since resurfaced above it, further communicating the continual pressure from the bulls.
Since we have not had a daily close above this level since May 7th, I suspect any daily close above it will bring in a fresh round of buyers so watch for a breakout pullback setup here as I don’t expect any breakout to take off for the moon since the volatility has been so low lately. If a breakout is to occur and this price action squeeze or pressure continues as is, I’d expect a breakout either this week or the next as there isn’t much more room for this pattern to play with, suggesting a quiet accumulation is building for the precious metal, perhaps for a big upcoming Aug/Sept. move which is the traditional time Gold has made its big surges historically. Bears can simply take plays off this key resistance level with tight stops above targeting the daily 20ema.
Climbing 4 weeks in a row, the Dow has gained 7 of the last 10 weeks since the yearly lows printed in early June. The index has been well supported as of late with all the major rejections being to the downside and two weeks ago forming a with-trend pin bar off the weekly 20ema.
However, price action is approaching a critical resistance at 13300 which is the yearly high and a daily triple top. It should be noted it is doing this on some of the weakest volume in over 5 years, suggesting the institutions are not really buying into this. I think there is definitely a price action play here around 13300 with stops above the yearly highs targeting 13051 and potentially the weekly 20ema around 12850