Gold Technical Analysis – We broke below some key levels. What’s next?

Fundamental
Overview

Gold continues to correct
lower amid the selloff in the US stock market as it tightens financial
conditions when it’s this aggressive.

The problem here is that we
got weaker economic data with increasing inflation expectations. The market
might be fearing that in case we get a slowdown, the Fed might not be fast
enough in cutting rates amid inflation remaining above target and uncomfortably
high long-term inflation expectations.

This is the growth scare
risk that was highlighted for some downside in gold given the overstretched
long positions. The next NFP and CPI reports will be key for the market. Hot
data, especially on the inflation side, will likely trigger a strong selloff in
gold.

Gold
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that gold pulled continues to pull back from the all-time highs amid the
selloff in the US stock markets. From a risk management perspective, the buyers
will have a better risk to reward setup around the 2790 level, while the
sellers will look for a break below the level to start targeting the 2600 level
next.

Gold Technical Analysis
– 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke below the major upward trendline and extended the drop as the
sellers piled in with more conviction. We now have a downward trendline
defining the bearish momentum.

If we get a pullback into
it, we can expect the sellers to lean on the trendline with a defined risk
above it to position for the drop into the 2790 level. The buyers, on the other
hand, will want to see the price breaking higher to regain some conviction and
pile in for a rally into new highs.

Gold Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see that we have another minor downward trendline defining the bearish momentum
on this timeframe. On an intraday basis, the sellers will likely lean on it to keep pushing into new lows, while
the buyers will look for a break higher to target the next trendline and a
break above it. The red lines define the average daily range for today

Upcoming
Catalysts

Today we conclude the week with the US PCE data.

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