Yesterday’s green gap withstood the selling pressure. Today, the bears replied with a red gap. Who will win this battle?
Technical Picture of Gold
Let’s take a closer look at the charts below.
The first thing that catches the eye on the above chart is a red gap ($2,431.35-$2,438.50) created earlier today, which encouraged the sellers to act.
Thanks to their action, gold futures tested two nearest important supports about which you could read in yesterday’s Quick Gold Alert: the green gap ($2,417.40-$2,423.15) and the upper border of the upper border of the purple rising trend channel.
Despite this decline, both supports withstood the selling pressure, which suggests that as long as there is no daily closure below, then another attempt to move higher can’t be ruled out – especially when we take into account the current situation in the 4-hour chart.
From this perspective, we see that although the bears managed to invalidate the earlier breakouts (not only above the April’s peak, but also above the upper border of the very short-term green rising trend channel), the size of the downward move is still quite small as gold futures corrected only 23.6% of the earlier upward move.
Additionally, the futures are currently trading inside the orange consolidation, which suggests that only a successful breakdown under the lower line of the formation could translate into a bigger move to the downside.
At this point, it is also worth noting that the sellers tested the mentioned border of the consolidation earlier today, but they failed, which resulted in an invalidation of the tiny breakdown and formed a pro-growth hammer.
Taking these facts into account and combining it with the above-mentioned supports (the green gap, the upper line of the purple rising trend channel and the 23.6% Fibonacci retracement), it seems that the way to the south is not as wide open as it might seem.
In other words, the bulls may close their ranks here and regain lost points - especially when we factor in the current situation in the U.S. currency.
The U.S. Dollar – The Current Outlook
Looking at the above chart, we see that the U.S. currency slipped to an important support area (created by the medium-term green support line based on the previous lows, the 38.2% Fibonacci retracement based on the entire 2024 upward move and the 200-day moving average) in the previous week.
As you see, it withstood the selling pressure and triggered a rebound, which took the greenback to the previously broken 50-day moving average and approached the short-term red declining resistance line based on the previous peaks.
What’s next?
Although the CCI and the Stochastic Oscillator generated buy signals, in my opinion, as long as the above-mentioned resistances remain in the cards another move to the downside and a re-test of the strength of the green support zone can’t be ruled out.
If this is the case, such price action could support gold bulls and encourage them to push the price of the yellow metal higher in the very near future.
On the other hand, a breakout above the 50-day moving average and the red resistance line could translate into a breakdown under the key very short-term supports in gold.
Therefore, in my opinion, keeping an eye on the mentioned key supports/resistances is crucial at the moment of writing these words as it will help indicate the direction of the next bigger price move.
Summing up, although gold futures invalidated the earlier breakout above the April’s peak yesterday, the size of correction is still quite small (seen more clearly on the 4-hour chart), which in combination with all the technical factors seen from the broader perspective (you could read more about them in yesterday’s Quick Gold Alert) suggests that another attempt to move higher can’t be ruled out -especially when we factor in today's defense of the closest supports (in gold futures) and the situation of the U.S. currency. In my opinion, another move to the downside will be more likely and reliable if the bears manage to close the green gap and invalidate the earlier breakout above the upper line of the purple rising trend channel marked on the daily chart.
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See you tomorrow.
Anna Radomska