Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Today, we are presenting a potential tactical bearish opportunity on gold, carefully waiting for a break of that 1850 support as the trigger for the trade. The main question is, can the Fed’s hawkish shift and the USD strength take gold down?
If yes, then this trade will likely work excellently.
But if not, then this will be a signal that markets are not believing the Fed’s transitory inflation story, which could push gold above that big monthly resistance in the 1900 area.
However, for the foreseeable future (next few months), we believe the first scenario is more likely - that the hawkish Fed will be enough to halt gold’s rally and potentially start a new bearish leg down below 1800. Still, what happens exactly will depend a lot on where inflation goes
from here and how hawkish the Fed’s response to that is. That’s a lot of uncertainties and means that high volatility is likely in inflation-hedge assets like gold. Do not be surprised if we see big moves getting reversed and then reversed once more during this period! For these reasons, we stick to taking only tactical trades in gold, such as the one presented below.
Gold’s 10-day Range: Looking for a Bearish Breakout
Again, this is a tactical setup, and we are not trying to bet on the long-term gold outlook here. Instead, we are only saying that if this technical formation breaks down, gold will very likely reach the 1830 area, and potentially the 1800 round number area as well.
The formation is that channel/range on the intraday charts that was created following that big bull spike candle after the November 10 Fed meeting. The lack of follow-through to the upside for so many days after such a strong bullish reaction suggests nervousness is likely growing among the bulls. And as soon as that support trendline breaks, the bulls will likely
jump out of the train, which should open the floodgates to more immediate downside action here, as we said toward the 1830 and 1800 area.
The support trendline stands around the 1850 zone. Hence we can use this specific area as the trigger point. Moreover, gold tried to break below the Wednesday’s 1849 low today but failed to do so and instead we got a rebound. So, another attempt and a move below these two recent lows should be enough to signal the next bearish price leg.
This could also be used as the trigger signal (see below).
What Could Trigger This Setup Next Week?
Keep in mind, since we didn’t get a breakout thus far today and it’s Friday, this will likely be a setup for next week (so you have plenty of time to prepare).
In terms of potential calendar events that could trigger it, look out for the US GDP and PCE inflation reports next Tuesday and Wednesday. The FOMC meeting minutes will also be published on Wednesday evening. So, it’s a pretty busy calendar next week, and strong US data will likely further fuel Fed hawkish expectations, which could trigger this bearish setup in
gold.
Entry:
- Look for a bearish break of the support trendline around 1850;
- The price moving below today’s low of 1851 and below Wednesday’s low of 1849 would likely be a strong enough signal that a true bearish break is underway. Hence, you can even use a pending sell stop order to enter short here.
Stop loss:
- Look to place the stop above the most recent swing high on the 1-hour chart (setup and trigger chart). Currently, that is the 1864 level but could be lower by the time the support breaks.
Targets:
- 1st: 1830 zone
- 2nd: 1815 zone
Trade signals from past week
- October 28, 2021 – Long USDCHF from 0.9135, 1st target reached at 0.93 for + 165 pips; in progress toward 2nd target at 0.95 (trade idea sent Oct 21)
- November 4, 2021 – Short EURUSD from 1.1585, 1st target reached at 1.1350 for +235 pips; in progress toward 2nd target at 1.12 (trade idea sent on Oct 29)
- November 4, 2021 – Short GBPUSD from 1.3570, 1st target reached at 1.34 for +170 pips, still in progress toward 2nd target at 1.32-1.33 area, but more caution needed now as GBP hasn’t been as weak as expected, there is a chance that 1.33 target takes a lot of time to be reached (trade idea sent on Oct 15)
- November 5, 2021 - Short EURCAD from 1.4350, closed early around 1.4280 for +70 pips as USDCAD breaks above 1.26 and slide in WTI oil extends (trade idea sent on Nov 5)
TOTAL: +640 pips over the past few weeks
(1st targets reached on GBPUSD, EURUSD, USDCHF + closed EURCAD)
TOTAL: +4675 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
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High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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