Gold found resistance at 1,763.24 last week and has since pulled back to trend support of the 21 daily exponential moving average (ema). The beginning of a downtrend has now started to form, with a lower swing high and lower swing low in place. This can be seen on both the daily chart, and weekly chart, below.
Daily
Also, short-term bearish; the prior week ended with a Doji reversal candlestick pattern. A Doji is created when the open and close for the week is at or near the same price. It reflects a shift in momentum, which had been up for about five weeks and now looks to be turning bearish, at least short-term.
At this point is would be perfectly normal for Gold to swing back towards support of the downtrend line, which was broken several weeks ago. If Gold is going to have a chance of rising above last week’s high in the near-term, any correction at this point should hold support of that trend line.
Weekly
Near-term support is at last week’s low of 1,704.4. A break below that level targets approximately 1,671.07, the 38.2% Fibonacci retracement of the prior uptrend, as well as a previous resistance zone created around the downtrend line.
The next level to watch below there is 1,652 to 1,654, the convergence of the 55ema and 200ema on the daily chart. This is followed by 1,642.70, the 61.8% Fibonacci retracement support level.
A move above last week’s high of 1,763.24 then targets resistance around 1,803
Crude Oil
Oil has continued to progress inside a consolidation pattern, with the previous internal descending triangle having now developed into a symmetrical triangle – inside a larger bullish ascending triangle. The uptrend line across the bottom of the triangle(s) has been tested twice recently and has held as support, almost perfectly.
Daily
We now see a situation where the top line of the symmetrical triangle and uptrend line are converging. This tells us that Oil is getting close to breaking one of those lines, which will tell us something about direction which could lead to a pickup in momentum and trend.
The odds favor a break higher given the prior uptrend, bullish continuation pattern (ascending triangle), test of the bottom triangle line, and that Oil remains above support of its 200ema on the daily chart.
A move above $100.53 confirms a breakout of the symmetrical triangle. That could be the beginning of a rally that takes Oil through the recent high of $103.72, or Oil could find resistance there and continue to trade inside the ascending triangle formation. A breakout of the ascending triangle is signaled on a move above $103.72. The target for the pattern is 114.10, which is also the previous high from May 2011.
Weakening is first indicated on a break below the bottom uptrend line of the triangle. However, close by is support at $95.80 (recent swing low), followed closely by the 200ema, now at $95.20. Oil would have to break below the 200ema to give a bearish signal that would indicate a possible acceleration in selling.
A more significant support area is at $92.70, which matches the 38.2% Fibonacci retracement of the medium-term uptrend. And, further down is support around the $89.18 price area (previous support and 50% trend retracement).
EUR/USD
The rally in the EUR/USD remains stalled in the area of the 38.2% Fibonacci retracement of the prior trend. A breakout attempt from consolidation was made later in the week but has so far failed, with the pair closing back within the pattern.
4-Hour
Support of the trend is defined by the 200ema on the 4-Hour chart, currently at 1.3079, while support for the consolidation phase is at 1.3025. A move below either of those levels starts to increase the odds of a deeper decline.
To confirm a continuation of the uptrend a break above last week’s high of 1.3321 would need to be seen, and supported by momentum. The next target above would there is the 1.3430 price area, which is the 50% trend retracement level. Higher still is 1.3604, previous resistance and support, and close to the 61.8% trend retracement level.
S&P500 Index
The S&P500 Index has closed higher for the past five weeks in a row with the range of last week noticeably less than the prior four and the close near the open, reflecting a slowdown in momentum. It’s remained in a well-defined low volatility, ascending trend channel during that time with the 21ema along with the uptrend line marking trend support.
Daily
Any pullback lower at this point could first find support at the 21ema, approximately 1,325. A break below that level signals the possibility of further weakening, down to the recent swing low at 1,299.6.
Still lower is potential support around 1,277.8. This was previously resistance and close to a 38.2% Fibonacci retracement of the shorter internal uptrend.
Further strengthening is signaled on a move above last week’s high of 1,355.5. Previous resistance above there was at 1,358.8, followed by 1,377.
For further details please contact: Bruce Powers, CMT
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Head of Research & Analysis Trust Securities Dubai, United Arab Emirates
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