Gold futures fell sharply last week after hitting a seven year low on Monday. Although U.S. Treasury yields declined, U.S. equity markets plunged and the U.S. Dollar weakened, sellers hit gold pretty hard. Traders said the selling was related to profit-taking and long liquidation. Hedge funds and professionals may have sold gold in order to meet margin calls caused by steep sell-offs in other assets.
Last week, April Comex gold settled at $1566.70, down $82.10 or -4.98%.
Despite the steep reversal to the downside, the fundamentals remain bullish with the market expected to continue to get support from central bank rate cuts. The Reserve Bank of Australia (RBA) is expected to make a rate cut on Tuesday and the Federal Reserve later in the week.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart, however, momentum may be getting ready to shift to the downside following last week’s potentially bearish closing price reversal top.
A trade through $1691.70 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through the last main bottom at $1458.50.
A trade through $1564.00 will confirm the closing price reversal top. This will also shift momentum to the downside. This could trigger the start of a 2 to 3 week counter-trend break.
The short-term range is $1458.50 to $1691.70. Its retracement zone at $1575.10 to $1547.60 is the first downside target. The market tested this zone on Friday.
The major range is $1232.20 to $1691.70. Its retracement zone at $1462.00 to $1407.70 is controlling the longer-term direction of the market.
Weekly Technical Forecast
Based on last week’s price action and the close at $1566.70, the direction of the April Comex gold market this week is likely to be determined by trader reaction to the short-term 50% level at $1575.10 and the uptrending Gann angle at $1586.50.
A sustained move over $1586.50 will put the market in a strong position. This could trigger a rally into $1627.90.
A sustained move under $1575.10 will signal the presence of sellers. This could trigger a further break into the Fibonacci level at $1547.60. If this level fails then look for the selling to possibly extend into the uptrending Gann angle at $1522.50.
This article was originally posted on FX Empire
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