Gold has been rallying non-stop for almost two weeks despite some strong US data that pushed real yields and the US Dollar higher. The decoupling with the usual drivers caught many wondering what could it be that is moving the market into new highs every day. The latest push higher though was justified by the big drop in the price index in the ISM Services PMI yesterday, which quelled some inflation fears and sent real yields and the US Dollar lower. The next big data to watch will be the NFP tomorrow and the US CPI next Wednesday.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold continues to rally into new all-time highs with almost no pullbacks along the way. The price got a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. In this case, we might see a pullback into the trendline where we have also the confluence of the 50% Fibonacci retracement level and the red 21 moving average. That’s where we can expect the buyers to step in to position for new highs while the sellers will look for a break to the downside to invalidate the bullish setup and position for a drop into new lows.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg higher is diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it could be a signal for a pullback into the 2222 level where we have the trendline and the Fibonacci retracement level. We can also notice that the recent price action formed a rising wedge which is generally a reversal pattern with the base as the target. The sellers will likely pile in already on a breakout to target a pullback into the major trendline and eventually a break below it.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the rising wedge and the divergence with the MACD as this type of pattern is divergent in nature. We can see that we have a support zone around the 2288 level where we can find the confluence of the bottom trendline, the previous swing high level, the red 21 moving average and the 38.2% Fibonacci retracement level. This is where we can expect the buyers to step in with a defined risk below the trendline to position for new highs. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the major trendline around the 2222 level.
Upcoming Events
Today we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report. Strong data is likely to weigh on Gold, while weak figures should give it a boost.
