Gold Breaks Double Bottom Lows

After forming a double bottom on the daily chart, price fell through the floor at $1662 shedding almost $20 on the day or 1.2%.  Price did however run into some buying pressure as some investors still want to be long.  You can see this as the previous two bear candles had strong rejections to the downside with some solid price overlap.  The last bar formed a very tiny inside bar, telling us the market is really undecided about what to do after such strong selling.
If the daily lows of $1635 get breached, then we are expecting a move to $1629 in a jiffy where we think is one of the last bastions for bulls to get back long on this pair, as the next support doesn’t come to the big figure at $1600.  In the short term, $1662 now acts as resistance and price will have to break and close above this to demonstrate the bulls have taken control of the market.  Until then, the bears have the reigns

USDJPY – Forms Inverted Pinbar

After breaking the former yearly highs at 82.60 which we talked about, price has been on a tear climbing 7 of the last 10 candles and looks to make number 8 as we speak. We discussed this setup in our forex price action commentary yesterday with the pair hitting our target of 83.50, locking in over a 4:1 reward to risk play so hopefully you got in on some of that play or at least the break.

Price has just formed an inverted pinbar at the top of the trend, which was the first bear candle in the last 5, so 1 in the last 20hrs of price action.  This inverted pinbar tells us (short term) even when the bears could manage to take control of the bar, bulls rejected most of their downside push.  Since then, price has cleared the highs of the inverted pin, suggesting trend continuation.

If price can close above 83.90, then we expect 84.58 to be the next upside target with a break of this clearing the way for the April 2011 highs of 85.47.  Price may be a little over-stretched at this point so we’d take pullbacks into the 83.50 or 83.09 should they happen first before a sustained break above.

On The Fundamental Side:
As treasuries continued to get dumped, we are suspecting part of this rally in stocks which has been happening on low volume (until recently) is really a question of cash needing a place to go, and so its heading into equities, possibly because nobody believes Bernanke won’t print more money as he seems to hit the CTRL + P when it need.  That plus the JPMorgan stock buyback along with a few others has fueled a rally in stocks, which has been a boon to USDJPY while bad for commodities.