A GOOD DAY - Not a bad day of trade on Wednesday. If you recall yesterday's report, I had been looking for stocks to stall out and to sell USDJPY on a rally above 121.00. All of this played out nicely and I am now sitting on a USJPY short from 121.05. In the technical update I cited a 78.6% fib retrace at 121.05 and that is what drove me to isolate that level as an ideal opportunity to sell this market into what I had thought was a corrective rally looking for a lower top. I believe there is risk for additional weakness here back towards those recent 116.00 area lows, and will be looking for a wave of risk liquidation to fuel the retreat. Still, my risk has now been eliminated on this trade, with the stop-loss trailed to cost.
THE YELLOW METAL - Another trade that set up on Wednesday, that I have since exited for a small profit was a GOLD long around $1105, following the violent intraday declines. The market had been brutally beaten down and with the price also testing some key support, I liked the idea of taking a shot. But unfortunately, the follow through was limited and I wasn't looking to hold on overnight. GOLD has been really difficult to read these past few years, with the market unable to find any bids.
SAFE-HAVEN FLOW - I can remember several years back when the opposite held true and GOLD rallied on everything. But now this market is struggling to stay supported, Fundamentally, it seems the metal is battling outflows from broad US Dollar demand and inflows from safe haven bids. Right now the USD demand is what is weighing more heavily, though I'm not sure this lasts much longer. I actually think there is room for GOLD to pop on safe haven demand if stocks continue to sell off and threaten those extreme lows we saw back on August 24th. Otherwise, I would caution against buying Kiwi into this sell-off as today's RBNZ rate decision was very dovish, leaving the door wide open for additional rate cuts going forward.