Gold, Oil and EURUSD Weekly Analysis - Week 51
Will gold test the 1228 support?
Gold prices have managed to trend lower over the past few days after failing to breakout above the 1248 resistance level. The decline off the highs near 1248 have been gradual.
Still, the downside breakout off the minor support at 1240 indicates that gold prices have much more room to correct. We watch the 1228 level where support is very likely to be formed. The reasoning behind this is the fact that the price level of 1228 previously served as resistance. The breakout off this level on December 3 saw no pullback as price rallied strongly to the 1248 resistance.
A corrective move toward 1228 level will see proper support being formed. This would then give more conviction for price action to once again retest the 1248 resistance level. There is a risk of a decline below 1228 level which could send gold prices even lower to the 1200 mark.
For the moment however, we remain biased to the downside for a test of 1228.00 as price action remains firmly above the Ichimoku cloud.
Crude oil continues to consolidate
WTI Crude oil prices have remained strongly stuck in a range of 54 and 50. This is a welcome change given the strong declines in the previous weeks which sent oil prices tumbling from highs near 76.
Make no mistake that oil prices are currently bearish. However, the consolidation within the said levels indicates a temporary pause. As a result, there is a strong change that WTI crude oil prices could target the 58.00 handle to establish resistance. There is an equal risk of oil prices breaking to the downside from the current range.
This could potentially renew the bearish trend in the commodity. However, given the fact that the declines saw no meaningful pullback, we expect that the chances of a correction are high. The 38.2% Fibonacci retracement level is seen around the $60.00 handle which is a few points above our target of 58.00.
For the moment, we stay on the sidelines for Crude oil and wait for price to decide the next leg in the trend. A close above $54.00 could validate our upside bias as we target $58 and potentially the $60.00 handle.
Will the euro test $1.1200?
The euro currency has been very weak and showing little signs of strength. The momentum looks to have been sapped with the euro left to the mercy of the flows in the U.S. dollar.
With price below the Ichimoku cloud, the common currency is in a bearish trend. The consolidation since early November has kept the EURUSD caught in a tight range which has morphed into a triangle/pennant pattern. Friday's price action saw prices briefly spilling out to the downside.
This raises the prospects that the EURUSD could be on its way to test the $1.1200 level of support. In the medium term, the common currency has been trading sideways within 1.1450 and the 1.1200 levels. Therefore, it is best to remain on the sidelines to see how price action will evolve.
To the downside, a close below 1.1200 could trigger further declines and potentially renew the bearish outlook for the euro. However, watch for a possible breakout to the upside above 1.1450. This could trigger a much needed long term correction in the euro. For the moment, it is best to remain on the sidelines.