Forex Trade Signals and Setups Aug. 22nd
USDCHF – Caught between a rock and the SNB
After spending over 65% of its days this year selling off, the pair has been in a conundrum as of late with the SNB (Swiss National Bank) having enough of the CHF’s rise hurting exports (stinks not making much money off their chocolate which is damn good if I might say) and affecting their business in the Euro region. They drew a weapon which is hanging over the heads of the markets like the sword of damocles – that they would peg the CHF to the Euro if it continued to gain against the regional currency. This seriousness was not seen before and since then, people have been cautious about trading the pair in their favored direction which is to buy it against everything across the board. Since then, the pair bounced and has been held in a holding pattern between the big figure at .8000 and the daily 20ema which it has rejected 4x off of since closing above it.
The tightness of the price action is suggestive of traders tentativeness around trading this pair and rightfully so, should they call our bluff. This plus the Jackson (a) Hole meeting which Ben Bernanke will spill the beans whether he is going to do QE3 and if what he has in store will be enough (unlikely). This over-arching threat by the SNB + the upcoming meeting will likely keep traders from taking any serious positions until we know more. With that being said, we suggest only taking short term positions and perhaps straddling the two lines in the sand (see chart below) taking which direction draws rambo style first blood.
One thing to note. If I had to choose between being long CHF or short CHF in the medium and long term, i’d rather be long and here’s why. Because the Central Banks across the world have gotten it wrong consistently year after year for a long time now and all their efforts have really been in vain. Thus, if I had to fight anyone, I know it sounds strange, but i’d rather fight the central bank than fight what would be the global markets desire to move into safe haven currencies/instruments and the CHF fits that bill. With CB’s being consistently wrong, i’d rather go against them then be for them considering their track record as of late is beyond dismal that I could probably do a better job managing their economies than they have (may be an overstatement but you get my point).
Gold – Going to $2000?
In the month of August, the shiny metal has only lost ground on a closing basis 3 days the entire month (out of 15 total). Yes, 80% of every day, gold has gained ground on a closing basis and we do not suspect this trend to end anytime soon. Why? From a technical standpoint, unless the Comex comes in and raises margin requirements, we do not see any reason to short something that has 12 out of 15 days gained ground and has appreciated 18% over the entire month of August. The last close was towards the top suggesting the buying pressure was strong and consistent into the close meaning nobody is thinking taking profits.
Combine that with the fact Chavez just ordered 200 of his 356t (tonnes) of gold reserves to be shipped back to his home country and what will likely ensue is a game of seeing who really has reserves as the Comex is looking short on supply along with hedge funds having far more speculative long positions, or bets prices will rise, outnumbered short positions by 21,928 contracts on the Comex division of the New York Mercantile Exchange so I think this tells you where they smart money is betting gold will go.
So in answer to the question, ‘will gold get to $2000’ the answer in our books is yes and its just a question of how fast. We suspect before September is over we will see it and would not be surprised to see a $2000 print before this year is over. We would like to note how extreme the spread is between the 20ema and current price which may suggest a snap back is needed before a further rise but remember, gold is not just a hedge against inflation or a devaluing dollar, its a hedge against bad governments and we are seeing this globally, especially in the US and Euro region so people are going to flock to where they believe money will be safe in times like these and thats gold and why you are seeing the prices rise the way they are.
Any pullbacks to the 20ema should be considered (pardon the pun) golden opportunities to buy as its spent the last 2mos above it. Also $1814 is another level which was the prior resistance high from two weeks ago which was soundly broken this week so those levels will suffice for now. Should it go straight to the $2000 mark be careful as there are likely large option contracts and other positions waiting there so a first touch should be avoided.
Silver – Starting another Run?
Its hard not to have a bias on this in some aspects since I own physical silver and in large quantities but i’m going to give you a purely technical picture here followed by a key statistic and some interesting news about the manipulation behind silver.
Starting with the technical, looking at the 4hr Ichimoku we can see price starting towards the bottom left (Aug. 9th) below the kumo with some mixed order flow behind it. But then after it broke the Kumo, it did what we always say to watch for which is a retracement back to the key lines and it did not disappoint bouncing off the 20ema and then never seeing it again to go for a short term parabolic move and sprint up from $39.50 where the cloud break was to current price $43.90 in a matter of 6 days closing (ironically) the last 6 days higher without having a losing day. This suggests very strong buying flow (along with the parabolic curve-like move) and we do not suspect this to abate much, save for a pullback in the short term to the 20ema which may setup another TKx signal to the upside. The kumo is strong and we suspect this to hold any pullbacks while the cheaper shiny metal likely makes another move towards the yearly highs just sub $50. Short term looks a little over-baked so we are cautious on trading breaks and would rather wait for a pullback or TKx signal before taking a new position but if we have to throw out a number, we would not be surprised to see silver trading at $80/oz within 6 mos.
Now, two things to note as we mentioned earlier;
1) historically silver has maintained a 16:1 ratio with the price of gold which means it should be priced at $118.75 which makes it cheap by current standards. In 2008 this ratio was at 80:1 and now sits at 43:1 so the ratio is tightening meaning silver is gaining against gold and we expect this to continue.
2) please watch this video which explains some of the silver manipulation (which is criminal) going on and it will likely give you a picture on where its going in the future. Take your time with it as once it gets going, it will blow your mind what is actually going on.
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