Europe kept the minimum bid rate at zero, which was in line with broad expectations. Nonetheless, this caused a high volatility hiccup in EURUSD. Traders are likely to still be waiting for more information in the press conference. Thus far, Thursday has been remarkably uneventful, with currencies still waiting upon, it would seem, Comey and the UK elections. The Blue Box setups have triggered a few trades so far, but it may be interesting to eye XAUUSD on a deeper pullback, just in case risk aversion suddenly rises again over the course of the day. It is also worthy of note that we already have an XAUUSD trade short, so a counter-trade long would be a reasonable hedge to this, provided of course it is feasible within the rules of trading of one’s country.
Figure 1: XAUUSD Four-Hourly Chart – An Interesting Phenomenon
The basis of this trade is a somewhat unusual and interesting one. XAUUSD has just challenged its April high and is falling away from it. As the markets tend to repeat themselves, the previous behaviour may also lend a clue as to where price might attempt to find a base before mounting a secondary attack on the high. Hence, the zone of support which was created by the rebound in April, negative though its result ultimately was, may well prove to be the rallying point for XAUUSD very soon.
The danger, of course, is that history might repeat itself too well, and that the rally will turn out to be a lower high. In that vein, it is wiser to attempt to enter on a more sensitive trigger on a lower timeframe. In this case, that would imply the hourly chart.
Figure 2: XAUUSD Hourly – The Trigger Chart
The trigger would most likely be an (8, 2, 2) stochastic cross with a candlestick breakout for confirmation, although traders might also use other candlestick patterns. XAUUSD may not even decline to the zone marked, but if it does, it will present traders with a potentially viable trading opportunity.
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