Technicals | May 17 2010
By Rudi Filapek-Vandyck
The TechWizard is issuing a mild warning this morning, predicting that if global risk appetite continues to retreat, the Australian currency is likely to face further downward pressure too.
His warning comes on the same day as technical commodities traders at Barclays Capital report gold has revealed some “disconcerting” technical signals on price charts, indicating the traditional safe haven might not necessarily strengthen further in the days ahead even with risk appetite declining.
Let's stick with the second warning first. Gold has formed a Doji on daily candles and this, explain Barclays chartists, often signals “market indecision”. A Doji is a candlestick where the open and the close are the same. It is a technical signal that often appears near turning points.
To add to their caution is the fact that gold has failed to continue surging higher, even with risk appetite retreating and global worries rising on the back of euro-wobbles. In addition, note the chartists, open interest is at new all-time highs and sentiment (as measured by the DSI daily sentiment index) is over 90% bullish. The latter would indicate gold is presently an over-extended market, explain the chartists.
Finally, the Head-and-Shoulder bottom objective of US$1244/oz has now been achieved, which means short term traders have the perfect excuse to start taking profits.
Barclays chartists remain gold bulls on a longer term time-frame. They regard any pullbacks as counter trend.
The TechWizard, from his part, notes AUD/USD has remained in a trading band between 0.9400 and 0.8525 this year. Both limits will continue to act as strong barriers either way, unless confidently broken at some stage, he explains.
He remains uncommitted either way, but states if 0.94 gives in the Australian dollar would probably surge to a new all-time high, which could imply parity, but in case 0.85 gives in much lower values should be expected.
The TechWizard is the pseudonym of Scott Morrison, whose experience in financial markets exceeds twenty years. Morrison operates his own website nowadays at www.techwizard.com.au