The Rebound

After taking out the 200 day moving average, a cross not seen in more than 1 year, the CAD held firm at major Support of 1.0850. Preceding that bounce off of 1.0850 was the beginning of a reversal candle pattern known as the Rising Three (note that in this particular case the candle A open is slightly lower than candle 3’s close). One down candle (A) followed by 3 consecutive candles closing up, but the close of the third candle is not greater than the open of the first down candle is the first piece. The final piece is candle five which is a down candle (B) that at a minimum retraces the prior 3. As always you need secondary confirmation and that would come with a close back below the 200 day MA.

We spoke about the EUR in our piece yesterday. We stated that Thursday’s price action would be crucial as the EUR had found Support just below 1.22. A close below that level may precipitate another substantial decline in the EUR while a bounce off Support at least buys the EUR another day. In order to begin to call a bottom for the EUR we would next need to see the EUR close above short range Resistance, or 1.2580. Beyond that level would be the Fibonacci 23.6% Retrace at 1.2850.

Gold has been on a rush since the end of April when the 50 day MA crossed back over the 100 MA. We noted in our segment about 2 weeks ago that a retrace from Gold’s all time high was all but certain as price moved to far ahead of its 50 day MA as shown by the two green arrows. However, Gold has since found Support just north of the 50 day MA and bounced off that level. This creates a nice step pattern whereby higher lows and higher high are created. The Step pattern validates the presence of a strong trend. The validation is stronger when the steps are more uniform. A close below the most recent low suggests the trend maybe weakening while a close above the prior high implies the trend will continue.

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