We’ve got it! We have the breakout in the USD/JPY pair, and gold – in a completely unsurprising way – declined.
And that IS a game-changer, even if many people fail to view it as such.
This time, the trigger came from the inflation numbers that were above the expected levels and the market now is pricing the scenarios in which the Fed doesn’t cut rates as quickly as it had previously been expected.
In consequence, the U.S. dollar’s value increases while gold decreases. The S&P 500 Index futures declined as well.
The technical set-up was in place for days, and it didn’t really matter what kind of event or statistic triggered the move – it seems that the CPI did the trick, but in reality, the reason for the strength in the USD and the declines in gold and stocks were known previously, based on multiple technical indications. At least those who followed my analyses were prepared.
We took profits from the recent long position in gold when gold rallied to $2,342 (but gold then moved higher before the end of the day, so the odds are that my subscribers took profits at even higher gold prices), and two days ago I wrote the following:
In Friday’s second intraday Gold Trading Alert, I wrote the following:
"If I had to consider a trading position in gold and I was not able to short junior miners, I would be opening a short position in it if gold moved above $2,370.
That’s what just happened, so if one wants to open a short position in gold, I think it’s now justified.”
Gold price reversed its course yesterday in a classic way (shooting star candlestick), but since we saw those reversals a few times recently and they didn’t result in declines, I didn’t focus on yesterday’s pattern… Until I saw a change in the regular events earlier today.
Today is the first day since March 25 when gold hasn’t made a new intraday high. And given what’s happening in the currency sector, it might not be able to make that high at all. Perhaps it will be able to move to new highs only after many weeks (months?) of declines. We’ll see about that when gold approaches its previous highs.
For now, it’s quite clear that gold has indeed topped in the upper part of my target area (okay, it moved a few dollars above it, but not more than that) and that the huge downswing has already begun. Of course, since it’s just started, it’s not big yet. Which means that the trading opportunity is still here.
Let’s take a closer look at the key technical event of today’s session:
Ladies and gentlemen, we have a breakout!
In my previous analyses, I wrote that it’s quite likely that the rally in gold would continue while the USD/YEN continues to consolidate, and then I expected gold to start to decline once the USD/YEN breaks to new highs.
That’s exactly what just happened. The USD/YEN rate just rallied sharply above its 2022 and 2023 highs, and gold turned south.
So far, the slide in gold has been relatively small, just as the size of the rally in the USD/YEN is, but breakouts are important for a reason – this is just the first step of another big climb in the currency rate, suggesting that the decline in gold has only begun.
The USD Index is soaring as well, but it is the USD/YEN’s breakout that makes this rally so special.
The trade that I had featured previously is over, and if you managed to profit from it – congratulations.
And if you’re interested in the NEXT big (and likely quick) trade in gold, I have good news for you – this move is just getting started, and the opportunity is still here.