Gold, Oil and EURUSD Weekly Analysis - Week 6

Is gold regaining bullish momentum?


The precious metal posted a strong rebound on Friday, rising over one percent on the day. The gains come amid a mix of fundamentals that put investors to be wary of taking on more risk. Moreover, with the UK leaving the EU formally on Friday, January 31st, gold also found favor as a result.

The current gains in gold prices remains consistent with the view about the upside breakout. The ascending triangle is in play and we expect price action to rally to the 1600 level. Given the fact that prices were rejected previously, we expect a more firm test of this level in the short term.

The Stochastics oscillator is however showing signs of weakness. Unless we see a higher high to confirm the highs in prices, we expect a possible correction lower. The initial decline will see gold retesting the breakout level of 1571.50 region where support could form.

Oil prices remain weak near support

WTI 0302

Crude oil prices continue to remain weak. The declines are a result of bearish fundamentals that is currently dampening the outlook for crude oil. Price action however could remain consolidating at the current levels for the short term. Unless we see a new leg of bearish declines, oil prices could be looking for a rebound.

Right now, price action is at the confluence of the horizontal support and the falling trend line. While prices have pierced past the trend line, we could expect a pullback in the near term. This will confirm that the support level is in play. The upside bias could rise if oil prices rise above the 54.00 level where resistance is likely to form.

At the same time, there is a risk in crude oil prices of further declines. This will push oil prices back to the psychological level of 50.00. A retest of this level could confirm the short term correction.

Euro posts a strong rebound


The euro currency closed on Friday with solid gains, rising close to 0.50% on the day. The gains come partly due to the month end balancing which often see’s the U.S. dollar declining or turning stronger. The weakness in the USD has pushed the EURUSD closer to the resistance level.

Thus, despite a possible rebound, the euro currency remains strongly within the range that has been formed. The breakout above the resistance level of 1.1130 – 1.1111 needs to be breached to confirm further upside for the short term.

To the downside, the 1.1000 level is proving to be a strong support level for prices. This could mean that there is a chance for the euro currency to slip back and retest this support level firmly.

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