Gold Technicals – Bullish Pullback Seen But Bears Firmly In Play

Hourly Chart

Gold prices fell heavily last week after the Fed finally tapered current QE purchasing program by $10 billion each month. This move was unexpected, as analysts believed that Bernanke would prefer not rocking the boat in the final weeks of being the Fed Chairman. As a result of this turn of events, Gold bulls that were hoping that prices would receive a temporary boost were heavily disappointed, resulting in a flash sell-off that brought prices down to just under 1,220 in the immediate aftermath.

Nonetheless, the reaction stated above cannot be regarded as out of the norm – Gold prices pushing lower following Fed’s announcement makes perfect sense. What is more indicative of price direction/bias came in later, with Gold tumbling down during the subsequent London/European session which sent Gold cascading down to sub 1,200 levels and hitting a low of $1,184 per ounce. This decline lasted much longer and stronger compared to the initial knee-jerk sell-off, telling us that Gold is extremely bearish and further bearish outcomes can be expected moving forward.

But that does not mean Gold will trade lower continuously. Case in point, prices have recovered significantly since the $1,184 low and we are currently trading above the key 1,200 psychological levels. However, bearish bias remains in play, and a test of 1,200 in the near future remains likely as long as we stay below the soft resistance of 1,207. That being said, it may be difficult to breach 1,200 in the next few hours considering that lower wedge line may provide additional support against bearish push.

Weekly Chart

Weekly Chart is bearish too, but price action favors a temporary bullish pullback. It should be noted that last week’s low wasn’t able to forge a new 2013 low, with the previous low of 1,180 reached in June still standing. Furthermore, the rally seen on Friday coincides with a tag of Channel Bottom, which suggest that a push towards Channel Top may be possible despite the strong bearish pressure that is in play now. This notion is corroborated by Stochastic indicator which is the most oversold since June 2013, when the 2013 low was made which suggest that current bearish momentum may be overextended and favors a bullish pullback in the near future.

More Links:
NZD/USD Technicals – Bearish Below 0.82 But Don’t Expect Landslide
Week in FX Americas – Bernanke Tapers on His Final FOMC
Week in FX Asia – Abenomics First Year The End of Deflation

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