Gold finally had a pattern breakdown which pushed it as low as $1460 before it managed to scale back above $1500 retesting the flag breakdown but the support of the diagonal black trendline still remains unbroken as the week closed exactly above it. With U.S – China trade talks to happen next week, there is an increased optimism for reaching a deal even if it remains to be an interim one and a positive unemployment data of U.S will likely limit the upside. Though nothing much has changed overall as fears of an imminent slowdown keeps on increasing every week owing to the poor global data which may act as a catalyst for capping the downside as well. Technically gold seems to have a change in trend after many weeks till the pattern breakdown is respected. To watch next week – Fed chair Powell’s speech, FOMC meeting minutes and other important data.
On the chart –
Gold finally broke through a bearish pattern stunning the ongoing bullish trend after many weeks which was also confirmed by the price action but failed to break the major line of defense for bulls – the diagonal black trendline which calls for a cautious action rather than an aggressive change in the mood. We have 2 scenarios –
1. Gold closed above the support, till it is held it can go to $1510. If this is crossed it can move towards $1527. And if this is taken out it can rally to $1541.
2. Gold at last turned evenly bearish , till the breakdown is held it can fall to $1495. If this is taken out it can slide to $1480. And if this is broken it can slip to $1464.
Bullish view – Bulls managed to hold on to the weekly support of the diagonal black trendline but failed to prevent the pattern breakdown which now limits their role until they manage to invalidate it. Fundamentals still nicely remain in favor of bulls but it might go for a spin as important events are lined up in the week. For bulls to get back the control they need to invalidate the ongoing pattern breakdown.
Bearish view – Bears finally had the upper hand even if they were unable to contain the price below $1500 as the breakdown got confirmed in the last week with gold also making a new low. Situations are not fully supportive of a bearish price action but can change dramatically in the week on the outcome of the important events. For bears to keep the trend in their favor they need to defend the breakdown and also aim for new lows as technicals now are supportive after long time.
On larger terms, Gold has turned bearish and prices are expected to head lower.
Possible trades are on both sides but mainly on downside, gold can be sold below $1498 for the targets of $1480 and $1464 with a stop loss placed above $1508. Longer term target $1448.
Dips towards support (and breakdown region) can be used to create shorts for the above mentioned targets.
Longs can be useful for scalp trades only until the breakdown gets invalidated.
Reference: Trading View
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