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.
