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On the daily chart, the metal is showing signs of indecision if we look at the daily candles, and doesn’t seem to have the impetus from the bulls to close above the December high of $1238.39. Short-term momentum is moving higher, although the various oscillators are starting to show signs of vulnerabilities. I would be looking to buy a break of this high but only if the metal can close above $1238.39. Until then I would be watching to see how the price behaviours. A simple look at the recent flat move in the 20-day moving average suggests the metal could struggle around current levels, with the price right at the upper Bollinger band. A move to $1199 (the 20-day moving average) could be on the cards.
I don’t have a fundamental view on bitcoin in the short-term but the technicals suggest this is an asset that is clearly best traded on the short side. Trading bitcoin involves looking at the tone of voice of the news flow and clearly all the news at present is skewed to the negative side. What is going to cause this vicious move lower to reverse is unclear. However, it’s worth remembering there has been a large pick up in hedge funds investing in bitcoin over the last 12 months and some serious money has been invested. There should be a point at which these funds will want to see the price supported and convince the market that a low has been established. Some good news is needed, but when that will come and in what form is unclear.
For traders who like volatility, bitcoin has fallen over 30% this week.
Copper was the big talking point in the market yesterday, with some very aggressive selling materialising on the Chinese open. Taking a look at price action on the daily chart, we can see strong buying coming in through European trade from what was significantly oversold levels. The fundamentals suggest copper is unlikely to rally significantly from here but it’s feasible we could see a squeeze to 26,854 (the 50% retracement of the December sell-off). The 14-day RSI is still at 15, with the stochastic oscillator also at extreme lows, suggesting price may bounce a touch, or at least the downside is limited. My preference (as always) is to align myself with the trend and sell any rallies, preferably to 26,854.
The market has seen a favourable ruling from the Advocate General of the European Court of Justice on Mario Draghi’s OMT (Outright Monetary Transactions) policy from 2012. This has effectively given the European Central Bank the green light to initiate quantitative easing on 22 January. Naturally, this is a negative for the EUR and, if it weren’t for the poor US retail sales, we would have seen further downside. As it stands though, we are seeing indecision on the daily chart, even though the trend lower is strong. I would look to initiate short positions on the pair if we see a daily close below the 8 January low of $1.1754. Although I am accepting a worse price, I feel this would be a good momentum strategy.