Gold Technicals – Heading Lower But 1,300 Remains Firm

Gold prices pushed lower as expected, but have found strong support just above the 1,300 round figure. Prices have been stabilizing mostly during today’s Asian session, but current early European session see Gold prices pushing up suddenly once more without warning. This move could be technically driven, as prices accelerated higher following the break of the descending trendline (see Hourly Chart below). However, it seems that price wasn’t able to clear the 1,320 soft resistance as well, keeping the overall bearishness intact.

Hourly Chart

With 1,320 holding, the descending trendline opens up as a plausible bearish target. Stochastic readings agrees, with readings close to the Overbought region already. Furthermore, Stoch curve is already tapering flatter, showing that bullish momentum may be slowing down. Even if price does manage to break 1,320, it is unlikely that we will be able to break Monday’s high and all the resistances between 1,330 – 1,345, making it a risky proposition to long Gold right now.

Daily Chart

Bearish pressure is even stronger on the Daily Chart, with the next level of support close to 1,200 in the form of Channel Top. Stochastic readings were at the brink of forming a bullish cycle signal, but that was dashed with 20.0 level acting as a strong resistance for the stoch level. Preferably price should find some support around 1,275 – 1,300 and have a slight rebound before the next leg of bearish movement take us to 1,200/Channel Top once again. The reason for this is so that bearish momentum will not appear too overstretched, and hence the risk of a snappy bullish pullback may be lesser.

With FOMC event risk just on the horizon, it is possible that a tapering announcement may send Gold prices sharply lower to tag the Channel Top even though prices are considered heavily oversold. However, the most bearish scenario would actually be the Fed choosing not to announce any Tapering measures this time round – this will result in Gold prices moving up in the short immediate term. Should prices continue to fail at climbing above the higher Channel Bottom, we will have a strong confirmation that sentiment in Gold is extremely bearish, and opens up the potential for a strong move to head towards sub 1,200 levels at the lower Channel Top would have been below 1,200 by then.

More Links:
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EUR/USD – Long Term Resistance Level at 1.34 Stands Tall

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