Gold Technicals – Climbing despite Cyprus resolution

This weekend has been a good one for Cyprus. Despite not gaining Russia’s support, Cyprus has managed to re-negotiate a new deal which will ensure deposits below 100,000 EUR will be fully guaranteed. Market responded positively with risk correlated assets trading higher this morning. However, Gold which is traditionally a safe haven currency failed to weaken, but instead traded higher.

Hourly Chart

To be fair, Gold did fell when the market opened, hitting below 1,603 – the support back on 19th Mar. Price climbed back shortly after, trading above the rising trendline in play since the Cyprus announcement last weekend. Fundamentally, there are good reasons for Gold to rise. The new deal place a much higher burden on high net-worth depositors, and this will scare other high-net worth persons to start seeking for safer havens as the threat of bank deposit seizures remain in the Euro-zone beyond Cyprus. On the other hand, it is unlikely that depositors under 100,000 EUR all around Europe will scamper to withdraw and buy gold now that their deposits are safe. Even if they wanted to buy Gold last week, their purchasing power is no way comparable to those high net-worth individuals. In short, the reason for gold rally last week has not dissipated with the new resolution, but instead has been exacerbated.

From a technical point of view, today’s rally is far from the top that has been forged on Friday. Stochastic readings have also peaked with the failure to push above 1,613 convincingly, with readings just touching the 80.0 barrier before heading lower. This does not suggest strong bearish breakout from here, but rather hints that price could still trade below the rising trendline – which happened on Friday, making a repeat not impossible.

Daily Chart

Daily Chart shows that down trend remains. Price is trading close to end Feb high, which failed to hit Jan lows itself. Stochastic readings are also deep in Overbought territory, which decrease the likelihood of price testing the previous swing high level, not to even mention Channel Top.

The divergence between Short-term and long-term direction is a clear sign that price may remain uncertain for an extended period of time. Indeed, from the Daily chart, we can see that price has been consolidating above 1,600 without any strong hint of moving higher or lower. Nonetheless, if short-term bullish momentum takes over and push price higher, long-term bias may be shifted especially if price has cleared the downward channel altogether. Without which, the pressure on bulls will remain and we could see Gold heading lower if Short-term direction start to line up together with the long-term bears.

More Links:
USD/SGD Technicals – Cyprus Deal spur short-term sellers
GBP/USD – Moves to Four Week High Around 1.5250
Week in FX Asia – A Yen to do something?

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