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Gold, Oil and EURUSD Weekly Analysis - Week 08

Gold breaks out from the bullish holding pattern

Gold 1802

Gold prices finally broke out on Friday as price action cleared the pennant/flag pattern that formed near the top. Price closed near previous highs around 1321, just a point above the 1320 resistance. The fact that gold did not manage to post a strong close above 1320 indicates a potential pullback in price action.

However, we expect that the upside bias will continue. Watch for gold to post a close above 1320 convincingly, which could add to the bullish bias. The bullish flag/pennant pattern indicates that the minimum upside we could see in gold is 1360.

The Stochastics oscillator has briefly dipped lower but is poised to show that the bullish momentum could be maintained in the near term. Any declines are likely to be limited to the 1300 level of support if the resistance is not cleared.

WTI Crude oil  is signalling a hidden bearish divergence

WTI 1802

The WTI Crude oil managed to reverse the losses from the middle of last week and price action posted three consecutive days of strong gains. By Friday, oil prices settled at $55.75. However, in the process, we see that there is a hidden bearish divergence that has formed on the Stochastics. This probably indicates a near term correction.

At the same time, near this top end of the rally, prices have consolidated to form a broadening wedge pattern. This also adds weight to the fact that oil prices could be in for a correction in the near term. Given that oil prices broke past the 54 level, we expect to see a retest of this level briefly.

A break down below 54.00 will trigger declines that could push oil prices down to the 50 handle which is pending a retest. Further gains, which are likely is however limited in scope with the untested support at 50. If the trend is changing, then watch for a pullback to this rally with oil prices forming a higher low ahead of further gains.

EURUSD remains range bound

EURUSD 1802

The common currency continued to remain very choppy with price action trading back and forth near the lows of 1.1325 and 1.1250 levels. The support level near 1.1312 - 1.1282 looks to be holding the declines in the short term.

On the daily chart, the EURUSD currency pair weak but is seen trading flat, a sideways trend that has been in place since late last year. As a result, the trend is difficult to predict at the moment. The main resistance level at 1.1450 is critical for price action. A breakout above this level with a strong momentum is critical to signal the upside bias.

To the downside, the currency pair is edging closer to the previous lows of 1.1200. This multi-year sport level is likely to prevent prices from falling further. The previously expected head and shoulders pattern remains in place though, but with prices ranging strongly, it is difficult to estimate whether the euro currency will post further declines below 1.1200.

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