Its no big secret that the USDJPY and Gold have a decent relationship, as USDJPY moves lower, Gold rallies higher etc. Most traders are aware of that. However you may have noticed there has been a slight disruption to that link and Gold is not following USDJPY much over the last few weeks.
When you look at the 6J Contract (Yen futures contract) and overlay it with the price of Gold it becomes apparent that something has gone astray since the middle of February. I think thats a potential warning for Gold bulls, as the current wave count I am counting on the 6J contract (inverse to USDJPY) is that the recent thrust to the upside is a 5th wave from a 4th wave triangle. So if 6J reverses lower and we see a bid on USDJPY, that could well see Gold get slammed lower.
Note: USDJPY has yet to make a new low, but a new low could be counted as a thrust from a triangle.
A rejection on 6J and a move back below 94.00 likely sees Gold reverse lower. Be careful if you are bullish Gold I think the weakness shown on Gold over the last few weeks, even as 6J has moved higher is a potential negative for Gold.
Above 94.20 on 6J supports further upside, potentially targeting a move towards 95.80 – 97.00.
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