The US data has started to miss expectations in the past few weeks which gave Gold a tailwind as it’s sensitive to interest rates expectations. In fact, we saw the market repricing expectations on the more dovish side with no more rate hikes expected and rate cuts starting to be priced as soon as June 2024. Yesterday, the big beat in the US ISM Services PMI changed those views on the more hawkish side with a 50/50 chance now for a November rate hike and rate cuts priced out in 2024. The data now is very important as the market finds itself at a crossroads between more rate hikes or a recession.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold is now testing the red 21 moving average. We might see a bounce here with the buyers leaning on the moving average to position for another rally into the 1984 resistance if the data weakens more. The sellers, on the other hand, are targeting again the 1893 support.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that Gold has been trading within a rising channel as the US data kept on missing expectations but reversed soon after breaking above the 1934 resistance. In fact, the price couldn’t rally from the strong resistance turned support where we had also the confluence with the 50% Fibonacci retracement level and the red 21 moving average and broke through it turning the uptrend into a downtrend.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had a divergence with the MACD right after the breakout of the 1934 resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, given the break below the support, we got a confirmation of a reversal and the sellers piled in more aggressively to target the 1893 support. We had another divergence after the selloff yesterday which gave us a pullback into the trendline and the 38.2% Fibonacci retracement level.
This is where the sellers are piling in to position for more downside and we should see the bearish momentum picking up if the price breaks below the black counter-trendline. The buyers will need the price to break above the trendline to invalidate the bearish setup and start targeting new higher highs, especially if the US data comes out on the weaker side.
Upcoming Events
Today we will have the last important US economic data for this week, which is the US Jobless Claims report. We saw just yesterday that Gold doesn’t like strong US data as that raises the chances that the Fed might need to do more raising Treasury yields and the US Dollar. So, if we get good data, we should see more weakness in Gold, while bad data should support it.
See also the video below
