Gold is a hard trade set up relying solely on technical analysis as the price movement is largely driven by fundamental analysis. In trading the precious metal, one has to be keen on what is happening on the global economic front, specifically with emphasis on the US economy. We all know that when the US sneezes the world catches a cold! After all, the most price volatility takes place in the commodity whenever there is significant economic data from the US. The reason is obvious. Gold is priced in US dollars. If you’re not great at digesting the fundamentals, be ready to keep up with the economic pundits to get a better and deeper understanding of the data, the impact it will have on the economy, and in turn the price effect on the commodity.
Fundamental Analysis
Currently, there is a lot of chatter of a slowing global economy. The US is nearing the end of its business cycle which in turn means recession is potentially on the horizon. Also, the economic data that came out of the US this past week were mixed. Job numbers were somewhat strong. Unemployment rate is down. ISM Manufacturing Index, a leading indicator, slumped to its weakest pace in more than a decade, suggesting that broader economic growth could slow due to the trade war. In addition, the US/China trade talks, BREXIT, and recently talks of the POTUS impeachment contributes to the uncertainty in the market. To add a little proverbial salt to the injury, POTUS tweets and off the cuff speeches/rants on the trade war and criticisms of the fed chairman introduces additional jitters into the market. The market’s response to these uncertainties is to take flight to safety haven currencies and Gold, driving Gold into a more bullish run, even more so, since April/May 2019.
Technical Analysis
Structurally: Daily, Weekly, and Monthly TF is an uptrend, while H1 and H4 TF are already starting to show a shift to a downtrend. $1,557 was a retest of a broken double top on the Monthly TF. The TL on the weekly TF has been breached. We saw a retest of the broken TL with a rejection of price at the $1,519 price level. There is a shift in trend as price is making lower highs and lower lows for the past 5 consecutive trade weeks. At this writing, price closed the week at $1,503, which does not line up with a significant support or resistance level. One can only assume that $1,500-$1,503 is a pivot point.
Where does price go from here? Here’s my two cents to help guide your prediction:
1. Keep an eye on the economic data.
2. Use the price movement in the stock indices and oil as clue.
3. Follow the POTUS on TWITTER (LOL. Just kidding!)
4. Be patient. This is key.
5. Do not use technical analysis in isolation of the fundamentals. WARNING: You Will Get Burnt!
We cannot ignore the fact that price got a hard reject at $1,519 when it retested the broken TL and therefore, price failed to close back above the TL. Could this be a fake out? We have to watch price action in the upcoming trade week. We may get a clue on either H1, H4, or Daily TF if price fails to make it back to $1,519. We have also seen a slight shift in trend with price making lower highs and lower lows on the charts.
Is this another hint we could potentially see price move lower this trading week? Unfortunately, we do not have the fundamentals to back up our technical set up because of the mixed economic data that came out of the US and the growing global economic uncertainties.
There is only one outcome with two conflicting viewpoints.
A. Based on the current global economic uncertainties, we see a trend continuation: $1,503-$1,655, or
B. Based on the technical analysis outlined above, (Price got rejected at $1,519 broken TL. Price making lower highs and lower lows-slight shift in trend), we counter trend: $1,503-$1,447.
Question: Are you Team Bull or Bear on the pair? Why?
Trading comes with a mix of fundamentals, technical, and instincts. So with this one, “Follow Your Heart…it KNOWS the Way.”
Good luck and happy trading!
Fundamental Analysis
Currently, there is a lot of chatter of a slowing global economy. The US is nearing the end of its business cycle which in turn means recession is potentially on the horizon. Also, the economic data that came out of the US this past week were mixed. Job numbers were somewhat strong. Unemployment rate is down. ISM Manufacturing Index, a leading indicator, slumped to its weakest pace in more than a decade, suggesting that broader economic growth could slow due to the trade war. In addition, the US/China trade talks, BREXIT, and recently talks of the POTUS impeachment contributes to the uncertainty in the market. To add a little proverbial salt to the injury, POTUS tweets and off the cuff speeches/rants on the trade war and criticisms of the fed chairman introduces additional jitters into the market. The market’s response to these uncertainties is to take flight to safety haven currencies and Gold, driving Gold into a more bullish run, even more so, since April/May 2019.
Technical Analysis
Structurally: Daily, Weekly, and Monthly TF is an uptrend, while H1 and H4 TF are already starting to show a shift to a downtrend. $1,557 was a retest of a broken double top on the Monthly TF. The TL on the weekly TF has been breached. We saw a retest of the broken TL with a rejection of price at the $1,519 price level. There is a shift in trend as price is making lower highs and lower lows for the past 5 consecutive trade weeks. At this writing, price closed the week at $1,503, which does not line up with a significant support or resistance level. One can only assume that $1,500-$1,503 is a pivot point.
Where does price go from here? Here’s my two cents to help guide your prediction:
1. Keep an eye on the economic data.
2. Use the price movement in the stock indices and oil as clue.
3. Follow the POTUS on TWITTER (LOL. Just kidding!)
4. Be patient. This is key.
5. Do not use technical analysis in isolation of the fundamentals. WARNING: You Will Get Burnt!
We cannot ignore the fact that price got a hard reject at $1,519 when it retested the broken TL and therefore, price failed to close back above the TL. Could this be a fake out? We have to watch price action in the upcoming trade week. We may get a clue on either H1, H4, or Daily TF if price fails to make it back to $1,519. We have also seen a slight shift in trend with price making lower highs and lower lows on the charts.
Is this another hint we could potentially see price move lower this trading week? Unfortunately, we do not have the fundamentals to back up our technical set up because of the mixed economic data that came out of the US and the growing global economic uncertainties.
There is only one outcome with two conflicting viewpoints.
A. Based on the current global economic uncertainties, we see a trend continuation: $1,503-$1,655, or
B. Based on the technical analysis outlined above, (Price got rejected at $1,519 broken TL. Price making lower highs and lower lows-slight shift in trend), we counter trend: $1,503-$1,447.
Question: Are you Team Bull or Bear on the pair? Why?
Trading comes with a mix of fundamentals, technical, and instincts. So with this one, “Follow Your Heart…it KNOWS the Way.”
Good luck and happy trading!