Gold rejected a key trendline yesterday as a minor
increase in oil prices and Treasury yields weighed on the precious metal. There
was no catalyst for the move as the price just continues to range amid lack of
meaningful developments.
The geopolitical situation is mostly unchanged,
although there was a report
yesterday from Al-Arabiya saying that a breakthrough in US-Iran negotiations
is expected to be announced this week. It’s not the first time we’ve had such
vague reports that eventually failed to live up to expectations, so take it
with a pinch of salt.
I think that growth concerns are starting to take
centre stage, so the most important event this week will likely be the release
of the US Flash PMIs on Friday, barring of course a surprising breakthrough in
US-Iran negotiations.
If the data
surprises to the downside, growth concerns might increase and we could see a
dovish repricing further out the curve. In this scenario, we should see gold rising
as real yields fall. Stronger than expected data, on the other hand, could
quell growth fears and drag the precious metal lower again.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold(CFD contract) rejected the
downward trendline as the sellers stepped in, with a defined risk above the
trendline, to target a drop into the 3,885 level. The buyers will need a break
above the trendline to start positioning for a rally into the 4,700 level next,
with the 4,500 level as the first target.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see the price has been consolidating in a relatively wide range. We can expect
the market participants to continue to play the range by buying at support and
selling at resistance until we get a breakout on either side. On the upside,
the buyers will likely target the 4,400 level next, while on the downside, the
sellers will keep targeting the 3,885 level.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we can
see the price pulled back into the minor support zone around the 4,130 level,
but probed below it a couple of times. The price action inside ranges is always
very messy, so ideally, traders should always wait for a breakout unless there’s
a catalyst pointing to an imminent breakout.
Nevertheless, if the price
breaks above the most recent swing high around the 4,150 level, we can expect
aggressive buyers to pile in to target a break above the 4,228 resistance. The sellers,
on the other hand, will look for a break below the daily low to extend the drop
into the 4,070 support next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On
Thursday we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the US Flash PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.