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Gold, Oil and EURUSD Weekly Analysis - Week 04

Gold breaks out to the downside

GOLD 210119

Gold prices posted sharp declines on Friday as price action finally broke the weeks of consolidation. The downside breakout pushed gold prices just a few points above the 1280 handle. In the near term, the 1280 support which is closely watched is likely to be tested for support.

A strong break off the 1280 support is needed in order to validate the downside bias. The next lower target comes in at 1250 which would mark a correction to the rally that started in October last year.

However, given the current volatility, there is scope that the 1280 handle could hold the declines. This could result in an upside bounce with gold likely to retest the previous highs formed at 1298. Given the promixity to the 1300 level, gold prices could eventually test this level, albeit briefly.

Still, the downside bias gains traction, only on a strong close below the 1280 handle. There is a good chance that this level could be quickly tested for resistance which makes for a good selling opportunity.

Oil tests resistance at 53

WTI 210119

Crude oil prices broke out to the upside and by Friday's close, price action closed above the 53 handle as it approaches the key resistance level of 54. A breakout above 54 resistance could potentially push oil prices even higher targeting the next resistance at 58.

However, given that there hasn't been any correction to the downside, oil prices could be seen easing back. A pullback off the current levels could push oil prices to test the 50 handle where support could be established. Given the fact that the levels between 54 and 50 has previously seen some consolidation, we expect this to be the scenario this time around as well. A break down below 50 could push oil prices down to the 46 handle where support could be established.

However, the hidden bearish divergence on the Stochastics indicate that the upside could be limited for the moment.

Euro at the crossroads

EURUSD 210119

The daily chart for the EURUSD shows some meaning to the consolidation. The large consolidating triangle pattern indicates that the sideways pattern that has been in place over the past few months could be broken.

However, it is anyone's guess on the direction of the breakout. An upside breakout could indicate that the euro currency could be on its way to test the 1.1700 handle. But to the downside, a break of the rising trend line could suggest that the euro will be testing the 1.1200 handle.

The bullish ascending triangle is still valid but somewhat weaker. As long as the trend line holds the declines, the EURUSD could be seen attempting another go to test the 1.1450 which is now likely to be tested for resistance. A close above 1.1450 will validate the upside in the longer term triangle pattern.

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