Gold, priced in USD bounced back last week after hitting 1292.20. The 4H chart shows the rally holding above a near-term rising trendline, and also holding below a projected falling trendline resistance. Traders also saw some common resistance around the 1325 area. On the 4H chart, we can also see that price is trading between the moving averages, above the 200-period, and below the 100- and 50-period SMAs.
As we begin a new week, we should probably expect some further consolidation in the near-term, but a bearish outlook for the week from a technical perspective. Here are some observations and outlooks based on the technical perspective in the 4H chart.
1) The prevailing bearish swing from 1345.28 to 1292.20 was a very strong one with impulse structure. It also suggests exhaustion after a bullish breakout to 1345.28.
2) After last week’s late rebound, the RSI held below 60 in the 4H chart. That means in this time-frame, the bearish momentum built by the prevailing bearish swing (when the RSI fell below 30) is being maintained so far.
3) If price breaks below 1300, clearing below the near-term rising support, a bearish outlook toward 1280 is likely in the short-term. 1280.50 is 61.8% retracement of the rally from June’s 1240.50 low to July’s 1345.28 high.
4) If price breaks above last week’s falling trendline, and above 1315, there could be further consolidation this week, with near-term upside risk toward the 1330 area to continue testing some common highs seen at the end of June. This consolidation mode still has short to medium term downside risk toward 1280 unless price can push above 1345.28 to show that the consolidation mode is over.
When you move to the daily chart, you see a market that has been consolidating since falling to 1180.20 in June 2013.
The bearish outlook from the 4H chart is within the context of triangle that reflect 2014’s consolidation and congestion. In fact below the above-mentioned 61.8% retracement level of 1280.50, there is further downside risk in the short-term toward some common support levels around 1270 and the the triangle support.
If the market does not extend last week’s bearish attempt, there is upside risk, but it should be limited in the very short-term unless the triangle resistance is broken with ease, which might require a clear break above 1350. A break above the 2014-triangle opens up the 2014-high at 1388.50, while a break below.
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