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Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 08/01/21

Gold prices unfolding into the cup and handle pattern


The precious metal gave back the gains on Tuesday after it failed to rise above the 1950 handle. The current risk on sentiment is also pushing demand for gold lower. With the U.S. electorate now confirming Joe Biden as the next President, there is a strong risk on sentiment in the market.

As noted in the charts, gold prices are at an interesting juncture as it morphs into a cup and handle pattern. While this pattern is still unfolding, if it is validated, then we could see a strong bullish breakout. For the moment, expect the pattern to be validated more if it breaks down below the 1900 level.

A close below the 1900 level could extend the declines down to the 1850 level. However, there is a risk that prices could reverse off the 1900 level. This will open the way for a retest back to the 1950 level once again. The 50-day moving average is also sitting just above the 1850 level which could also offer dynamic support for prices.

WTI crude oil breaks out higher

WTI 0801

Oil prices are trending higher in the aftermath of the OPEC+ meeting that concluded in the earlier part this week. While Russia proposed expanding oil production, many OPEC member nations opposed the idea. Saudi Arabia on the other hand decided to cut production by one million barrels. This led to a strong reaction in the oil markets.

From a technical standpoint, oil prices were consolidating into the ascending triangle pattern. The breakout from this level now opens the upside target to $51.45 initially, with scope for rising to $52.80 as well. A rally to either of these two levels will validate the bullish ascending triangle pattern.

Following this, any retracement will see prices retesting the breakout level near 49.30. Establishing support at this level could potentially signal that the upside bias is intact. Only a strong close below this level will suggest that a deeper correction is underway.

EURUSD maintains its consolidation near the top


The euro currency continues to trade mixed, posting gains on one day and reversing the gains on the next. Price action remains well perched near a two and half year high. And amid this consolidation, the euro currency continues to grind higher posting modest highs. However, it is evident that the upside bias is exhausting.

So far, the euro has failed to post any big gains beyond the lower median line channel. Furthermore, there is a bearish bias building up for price action. The Stochastics oscillator is already signalling a bearish divergence. Therefore, if prices snap below the 1.22 level, this could be validated.

A close below 1.2200 and a possibly lower high formation could confirm the downside in the euro currency. This will open the way for the much needed correction down to the 1.1900 level next where support is most likely to form.

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