December Gold is currently in a strong position, having broken out above a pair of downtrending angles from the $1270.60 to $1267.50 tops. These angles are at $1228.60 to $1230.50. The move also cleared a retracement zone at $1228.00 and $1215.00. Both of these prices are now new support levels.
December Crude Oil opened lower and took out a key Fibonacci level at 76.45, but heavy selling pressure failed to materialize. The market rallied off its low but still remains down on the day after the EIA reported an 800k drop in crude oil inventories. Analysts were looking for an increase. Prices have stabilized at the mid-session mostly on short-covering.
Technically the close over a 50% level at 77.98 is a sign of higher markets to follow. Now that the fundamentals have changed at least in the short-run, don’t be surprised if the market begins a retracement rally back to 80.22. The key will be breaking out above and sustaining a rally over the upper level at 77.98.
After a sluggish morning session, the September E-mini S&P 500 mounted a strong rally at the mid-session but ran into sellers at a 50% level at 1097.00. A breakout over this level should trigger a rally to the Fibonacci retracement level at 1104.25.
The inability to breakout over 1097.00 and the lower close suggests the market may have more consolidating to do.
The September Japanese Yen is consolidating inside the retracement zone created by the 1.1805 to 1.1579 range. This zone is 1.1692 to 1.1719. If the market can form resistance then look for it to make a run at the swing bottom at 1.1579. Not only will a breakout over this level turn the main trend to down on the daily chart, but it will also confirm last week’s weekly closing price reversal top.
Based on the current chart formation, it looks as if the key will be breaking under and sustaining a move under 1.1692. This scenario would put the market on the bearish side of both the 50% level and an uptrending Gann angle.
The short-term charts indicate that the market may have trouble at 1.1579 to 1.1526 and 1.1515 to 1.1447. Once these areas are cleared, then watch for a possible acceleration to the downside with 1.1294 a potential downside target.
The possibility of an intervention may still be lingering in the air. This speculation fueled last week’s rally, but weak U.S. economic data has prevented the market from following through this week.
The Japanese government and the Bank of Japan may still be considering an intervention, but at first wanted to weaken the Yen through a verbal intervention. At this time it is possible, that government officials and the BoJ are trying to drum up support for an intervention.
Another reason for a rally would be the possibility of a stock market rally. The market is looking good this week and a breakout to the upside could renew interest in the carry trade, a strategy that involves selling the Yen.
Traders should focus on one area of the chart at this time, 1.1719 to 1.1692. A close over the upper level would indicate strength, but a close below the lower level could indicate the start of a sharp decline.
