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Gold, Oil and EURUSD Weekly Analysis - Week 20

Gold’s consolidation shows no signs of a breakout yet

XAUUSD 1105

The precious metal continues to trade flat, albeit near the current highs frustrating traders. The sideways range between 1730 and 1684 is now into its third consecutive week, raising questions on when a breakout could occur. The precious metal tends to lead the market sentiment and this was evident from the gains made earlier in March and April.

But with prices now trading flat, the bullish flag pattern which gives an upside bias is starting to weaken. The overall bias remains mixed as there is scope for a breakout in either direction. In one way, this could be seen as a sideways move as the bullish rally could soon emerge on a upside breakout. Alternately, this consolidation could also be seen as the end of the rally as the precious metal could start a retracement. To the upside, gold must breakout above previous highs near 1745 for a confident rally, while to the downside, a close below 1684 will trigger a small correction to the 1643 level of support.

Watch crude oil prices for a possible inverse head and shoulders pattern

WTI 1105

Price action in crude oil, over the past few days has been somewhat quiet comparing to the volatility earlier. The rebound in oil prices comes as investors focus back on global economies reopening for business. However, the gains or rather the recovery from the lows below zero just a few weeks ago looks to be overdone.

This comes as the price level near 28.00 remains a strong resistance level currently. As a result, a reversal off this level could mark the formation of the right shoulder of the inverse head and shoulders pattern. The downside support off this reversal is around the 20.00 level.

If this is the case, then oil prices could be setting up for another strong rally in the near term. The inverse head and shoulders pattern will eventually see a breakout to the 42.00 level which will by the upside target at the very least and a move further to the 46.00 level.

EURUSD rebounds off support, but can prices go higher?

EURUSD 1105

The euro currency’s consolidation continues as price action is rebounding after slipping to the support area of 1.0784. The range is well established with the upper boundary seen at 1.1000. The consolidation comes as the USD has been trading weaker in the past two sessions, giving a modest boost to the common currency.

Following the reversal, if price action remains bullish we might get to see the 1.1000 level of support being tested once again. This will still keep prices well inside the sideways range. Even a breakout above 1.1000 level will see the next upper range of 1.1147 coming in as resistance.

Thus, for a bullish rally to emerge, the EURUSD will have to close above 1.1147 to see any further gains being made. To the downside, there is a risk that the EURUSD could break the support level at 1.0784. This will potentially open the way for prices to slip to the previous lows near 1.0700.

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