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Gold, Oil and EURUSD Weekly Analysis - Week 03

Gold prices drop one percent as consolidation continues

XAUUSD 1801

The precious metal was down one percent on Friday although prices continue to remain in a consolidation phase. Gold prices are trading below the 1850 handle having tested this level rather briefly on Friday. The declines come as the stochastics oscillator moves close to the oversold level. This could mean that a possible rebound is likely.

If the downside momentum continues, then gold prices could be potentially testing the 200 day moving average. The 200 day moving average currently stands near 1815. Therefore, if there is dynamic support here that gold prices could see a modest rebound back to the upside. This will see the precious metal trading within a tight range of 1815 and 1850 levels.

Price action still remains within the bullish Cup and handle pattern. Therefore, we continue to maintain a bullish upside in the precious metal. However, this bullish pattern gets invalidated if gold prices and next week below the 200 day moving average. This will potentially see prices testing the 30th of November lows near 1761.

Crude oil prices likely to start the correction

WTI 1801

Oil prices are down close to 3% on Friday. This comes even as prices attempted to make a rebound on Thursday. While this resulted in a bullish close, failure to post new highs saw oil prices giving back the gains. As a result, the price level near 53.31 is proving to be a strong resistance level.

This also marks are possible start of a correction in the commodity. For the moment the price level near 49.30 remains within sight as the initial downside target in the commodity. To the upside, any rebound could once again see the resistance area near 53.31 coming under pressure.

Only a strong breakout above this resistance area of 53.31 will open the way for further gains. The next main resistance level is seen near 55.00. The stochastics oscillator is very overbought, and this could result in a possible move to the downside. However, we cannot rule out another push higher for the moment, there is no bearish divergence that is forming on the stochastics oscillator. Therefore, although the bias remains to the downside, oil prices are at risk of another move higher.

EURUSD resumes declines to the 50-day moving average

EURUSD 1801

The euro currency once again resumed its declines with price action on Friday testing the 50 day moving average. The pace of declines has been gradual following prices breaking down below the 1.2200 level. As prices test the 50 day moving average, we also see that the stochastics oscillator has moved into the oversold levels. Therefore, we could see a modest rebound taking place here.

Any rebound from here on could see the price level of 1.2200 coming back as resistance. If we get to see such a move, and there is a reversal near 1.2200, then the common currency is likely to extend declines further. This would mean that following a move below the 50 day moving average, the common currency is likely to extend the declines down to the 1.1900 level. This will mark the initial completion of the downside correction that we are looking for.

To the upside, if there is a strong close above the 1.2200 level then we could expect to see some continuation to the upside. However, prices will need to break out above the previously established highs in order to maintain the uptrend. As a result, it is quite likely that the price action in the euro a starting to show exhaustion to the upside.

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