Gold Technicals – Slight Bearishness Seen As Bearish Momentum Continues

Gold bears continued the sell-off post FOMC last week, albeit only marginally. Prices started Monday lower, pushing from Friday’s close to 1,311 within the first 5 hours of trading. This is not the strong bearish response we would like to see following the break of 1,330, especially since prices managed to reach a low of 1,307 last Friday, but the overall bearishness remains.

Hourly Chart

Even within the small trading range since Monday open, price action remains capped by the descending Channel Top. Stochastic readings similarly suggest that bearish momentum should be coming out now, with Stoch curve cutting the Signal line. Should price rebound lower after tagging Channel Top and break soft support 1,312, we could see acceleration lower towards Channel Bottom, with 1,307 providing slight support.

Weekly Chart

Weekly Chart is bearish as well, with Stochastic readings looking likely to cross the Signal line by the end of this week, which will suggest that bearish momentum is continuing again. This will also act as a confirmation for the bearish rejection of Channel Bottom which occurred last week, opening up a move back towards Channel Top below with 1,200 and 1,230 providing interim support.

However, it may not be a smooth journey towards lower, as latest COT data actually showed an increase in speculative long positions once again. This is not the first time in recent months that institutions are buying gold, but it is one of the rarer moments where volume has increased in tandem – suggesting that this demand is adequately supported unlike the previous runs.

Then again, it should be noted that latest COT numbers are based on last Tuesday’s data, which is before the FOMC announcement – where market was speculating heavily on a dovish FOMC outcome. What may be more relevant currently is the post FOMC data which will only be reflected this Friday. But before we have that data on hand, do not assume that broad sentiment is bearish as institutional speculators do represent a sizable portion of market demand/supply.

More Links:
Week in FX Europe – Expensive EUR ‘Puts,’ Dovish ECB Gives Us A Lower EUR
EUR/USD Technicals – 1.35 Broken But L/T Bearish Movement Unlikely
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