Last week, the gold showed a strong correction. Yes, it lasted only 3 days, but such a powerful decline has not happened for several months. In last week’s newsletter, we offered our subscribers 2 basic scenarios. The most likely of them happened.
A large number of investors were happy to enter the yellow metal on a rollback. For 5 trading days we have seen virtually non-stop growth. The first target is not even historical highs, at $ 2065 per troy ounce. This is an insignificant target. Big speculators are looking at the price of $2,100, behind which the next batch of bear stops is set.
What makes us so sure of that? When breaking through the big levels, there is the following algorithm for setting the stops. Some players set the stops immediately behind the round level. In this case it was a price of $2000. And, of course, almost always such stops work. Very often, after the triggering of such stops, there are no new buyers in the market, and the price goes sharply in the opposite direction. This is exactly what happened.
Smarter investors and speculators understand this very well. That’s why they prefer to put their stops behind the next “less round number”. In this case it’s $2,100. The logic is as follows. If these stops are already knocked out by bulls, then there is no point in holding short positions, the space for price growth is huge. An additional positive for yellow metal was the new fall of the US dollar in the forex market against the major world currencies.
The European currency at the auction on Tuesday night reached the price of 1.1965. Most likely, this week we will see an epic battle for the level of 1.20. As in the example with the gold above, a huge number of stops of both buyers and sellers are located just behind this round price. The basic scenario we have already written about is as follows.
The US dollar will fall until the US presidential election this autumn. The important thing to remember is this. By the time of the election, the US dollar will be at its lowest level in 2-3 years. However, no one knows where the price will be for these 3 months. For example, after removing the stops behind the level of 1.20, we may see a powerful correction by 2-3 pips down.
What’s waiting for us today?
08.00 UK Retail Price Index for July
11.00 EU basic consumer price index for July
14.30 Canada Consumer Price Index Base July
20.00 Minutes of the US Federal Reserve’s Open Market Committee Meeting
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