top of page
  • Writer's picturen ev

Friday flows hint at profit-taking after a volatile week of trading

It is always best to pay the trader and to reduce risk ahead of the weekend. Especially when volatility and emotions are being run ragged. Lots of hopium bubbles are being popped, especially for investors in precious metals. With new hope coming back for traders in the equities markets. After a big bull trend, the first to sell are the buyers. The profit-taking subsides and then latecomers step in. If there is not enough buying pressure the bears sense this and start adding to their shorts until the weak holding bulls cave in and puke their position. That is what I think played out in gold in April 2022. This IMHO is a now showing the bears are in control and they want to go lower.

Market Wrap

Gold shorts that targeted the $1800/oz level may have cut their trade short if they closed out today. Based on the price action, some short covering took place at the big figure. The people who have been following my analysis know I am open to a test a lot lower, but it should be pointed out that when we break below the 61.8% Fibonacci retracement level, there is very little support left in these markets. We've seen it in the equities, and now we're seeing it in precious metals. There is much uncertainty in the world and investors are using the news releases to get in at levels of value or creating narratives to train traders to think one way, only to go against them later. In my opinion, we at the very minimum sweep the lows of the last impulsive move, then as traders puke their longs, we accelerate to demand or sweep the range lows and the double bottom from March 2021 to April 2021.

Equities around the world had a relatively bullish close for the day but remain bearish over the last month. We are seeing weekly closes in the green in some indices, which is a sign that maybe the worst is over or that we are going to get one of those bear markets rips, to sucker more people into thinking we are going higher. Currently, there is little reason for new highs to be expected as the world is in a worse off shape than what we started a month ago.

The USDCAD dropped -0.85% today as the energy markets ripped higher and the US dollar softened against its peers. 1.3000 has been an important level in the past and it is currently acting as resistance. The pullback to the 38.2% retracement level should it hold, indicates to technical analysts that the downtrend has strong momentum and an acceleration lower should be expected. Getting through the recent range is still going to be tricky IMHO, with 1.2600 literally a red line that needs to be crossed on this chart if the USDCAD is to come lower.

The Canadian dollar is being supported against the US dollar by a rise in Brent crude oil prices today. According to sources, Russia has stopped supplying gas to Finland due to the country's NATO membership plans. The easiest and most efficient alternative to gas is oil, so energy users will have to switch to oil or alternative energy. In addition, we're experiencing a reduction in global supply as well. With more demand and less supply, energy prices will rise. Which is exactly not what the central bankers and politicians need to help reduce inflationary pressures.

The USDJPY rose today after the extremely bearish candle that was printed yesterday. Getting back into the range in an uptrend is not something I am going to suggest is a buy signal just yet. I am going to wait to see if it breaks out of the top of the range and comes back inside to find the mean, before buying the continuation higher. Today’s price action may be a reaction to what happened yesterday, which could be the bulls selling out of their massive, long position. In which case a rip higher will entice latecomers to buy and if there is no volume to back it up, the bears will step in and start selling hard. Which is my biggest worry about buying today’s action. The forex heatmap showed the yen as being the weakest currency relative to the other majors. Plus, the USDJPY has been following along with the US 2-year yields which also happened to bounce today after selling off for a week.

The pound is also still firmly in its trend to the downside and today’s green candle is still a new lower low and currently a lower high on the daily timeframe, with little volume to back this up as a reversal level. We need to see some serious structural changes with larger swing highs and swing lows forming before getting bullish this pair.

The EURUSD sentiment dropped from being 75% bullish down to 67% bullish which is a step in the right direction and shows quite a few traders stopped out of their longs at the sweep of yesterday's low. We’re still hovering above the 2016/17 major swing low, and I am expecting that to be the catalyst which reverses this bullish sentiment and possibly sets us up for a bear market rally.


bottom of page