Gold Technicals – Downtrend remains despite NFP rally

Gold price traded higher last Friday due to a surprisingly weak US NFP number. Change in NFP was a mere 88K, lowest in 9 months and sharply below expectations of 190K. Gold prices jumped due to renewed hope of further QE actions from the Fed, and price managed to bounce higher from Channel Bottom to trade back into the 1,575 – 1,615 consolidation.

Daily Chart

This bounce alleviated bearish pressure for a short while, but ultimately long-term bearish pressure remains. Price traded quickly below 1,575 despite more negative news coming yesterday and today. It seems that Gold is only sensitive to sentiment of Fed’s QE actions, and stay relatively muted to all other data. From a technical point of view, the inability to hold onto 1,575 severely impair price’s ability to push back to Channel Top, and instead opens back Channel bottom once again. Stochastic readings also agree with such a possibility with readings appearing to form an interim top around the 50.0 level.

Hourly Chart

Stochastic on the short-term chart is equally bearish, with readings in the middle of a bearish cycle. 3rd April consolidation area may yet provide some support, though a break below 1,565 may allow bears to accelerate momentum towards the Daily Channel bottom. A break higher from current resistance level may find yet another interim resistance in the form of Monday’s swing high. However, should that level be broken, fresh bullish impetus may enter as the pullback from Monday would be negated, and bull trend from 4th April low can be reinstated for a push towards 1,600 – the next level of consolidation zone.

This Wednesday’s (2:00pm EST) FOMC meeting minutes may provide more reasons for Gold to rally as the minutes will be likely to cover continued dovish sentiments from FOMC members. However, that is unlikely to negate the huge bearish pressure that has been plaguing Gold ever since QE3 was announced. This could translate to a short-term rally higher, with bears eventually pulling gold back to test Daily Channel bottom once again later in the week. Speculative action for Gold is expected to fall from now leading to FOMC meeting minutes as traders seek forward guidance, which would also mean that Gold may continue to stay insulated from bad news originating from European and Asian in the interim, increasing technical relevance and significance.

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