Gold Technical Analysis – The strong US PMIs weighed on the market

Fundamental
Overview

Gold got hit hard last Friday by the strong US
PMIs as real yields rose following the data release. The report though
showed that inflationary pressures continue to abate and that’s also the reason
why the market’s expectation for interest rates remained unchanged. The
overreaction from the US PMIs is getting slowly erased this week as the market
digests the data.

As of now, it looks like gold have limited downside but lots of upside as
inflation abates slowly while risks to the growth picture increase the longer
the Fed keeps policy restrictive. In the short-term, strong US data might weigh
a bit on the market, but in the long-term weak data is likely to trigger bigger
upside moves.

Gold
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that gold has been mostly rangebound although the market maintains a
bullish bias. From a risk management perspective, the buyers will have a better
risk to reward setup around the key 2277 support
zone where we can also find the 38.2% Fibonacci
retracement level for confluence.

The sellers, on the other
hand, will want to see the price breaking below the support to change the bias
and increase the bearish bets into the next support around the major trendline where we can also find the 61.8% Fibonacci
retracement level for confluence.

Gold Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action around the 2325 zone where we can
also find an upward trendline adding some extra support. This is where we can
expect the buyers to step in trying to fade the overreaction from the US PMIs
and position for a rally into the 2387 level next.

The sellers, on the other
hand, will want to see the price breaking below the upward trendline to
increase the bearish momentum and position for a drop into the key 2277
support.

Gold Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see the selloff triggered by the US PMIs and the consolidation around the 2325 level.
A break above the 2335 level should give the buyers more confidence to pile in as
the momentum would turn more bullish. The red lines define the average
daily range for today.

Upcoming
Catalysts

Today we have the US Consumer Confidence report where the market will be
focused on the labour market details. On Thursday, we get the latest US Jobless
Claims figures, while on Friday we conclude the week with the US PCE.

See the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.