Technicals | Nov 17 2016
By James Stanley, currency analyst, FXCM
[All prices US$/oz]
Talking Points:
- Gold Technical Strategy: Longer-term bullish case exists > $1,200; near-term has been aggressively bearish.
- A major support level on Gold is at $1,200; this is the 38.2% Fibonacci retracement of the Bretton Woods-fix to the 2011-high, and has also provided the swing-low in May.
In our last article, we looked at the deluge in Gold prices as a ‘big picture,’ long-term support zone was nearing. The swing-low on Monday of this week came-in right at the 50% Fibonacci retracement of the December low to the July high at a price of $1,210.85. But just below that level is a more critical zone of potential support at $1,200, as this is the 38.2% retracement of the Bretton Woods Fix of $35/ounce up to the 2011 high of $1,920. Perhaps more importantly, this level has been recently confirmed as support with an inflection marking the lows in May.
On the chart below, we’re looking at the 2016 move in Gold prices, and we’ve added a short-term trend-line connecting the lows in price action since February 10th.
USD gold one-year chart (see key below)
Red box: "Former support trend line now showing as short term resistance"
Blue box: "Confluent batch of long term support"
Since that support inflection at $1,210, sellers have begun to display a bit of tepidness. This has allowed prices to trickle back-up to the $1,230-level, and short-term price action is now finding resistance on the projection of the short-term trend-line that we looked at above. But sellers have been unable to re-take control of Gold prices over the past two days, as we’re also seeing some element of ‘higher-lows’ on the hourly chart.
So while the near-term trend is still very much bearish here, seller’s conviction appears to be waning, and should the rampant strength seen in the U.S. Dollar of recent begin to recede, the long side of Gold can become attractive again. Of particular interest to this theme will be resistance levels at $1,230 and $1,250. The level at $1,230 has shown as near-term swing-resistance, and $1,250 is a Fibonacci level that had also provided the swing-low during the Brexit referendum.
Until those highs are taken out, traders will likely want to move forward with a bearish bias on Gold.
USD gold eight year chart (see key below)
Red box 1: "Massive drop around/after US presidential election"
Red box 2: "Short term support trend line now showing as resistance"
Red box 3: "Short term support trend line now showing as resistance"
Red box 4: "Support inflection off of 50% Fibonacci retracement"
Brown box 1: "Near term trend is still bearish, but waning"
Brown box 2: "Equalized price action after huge move lower can be emblematic of sellers lacking conviction to drive prices lower"
Blue box 1: "Should price action break above $1230 (near term swing high) or above $1250 (prior swing low), bullish positions can become attractive again"
Blue box 2: "roughly equalized price action since support inflection"
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