Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 27/09/19

Will gold prices correct lower?

The precious metal posted a rebound to form a lower high at 1535 and promptly retreated lower. Price action broker past the support area to settle at 1503 by Wednesday’s close. Following this, price action was largely muted while still trading in the support area.

This potentially equalizes the bias. There is scope for gold to breakout to the upside once again. However, this will need to follow with a higher high forming. Else, we could expect this upside momentum to be a fake breakout which could capture weak long positions near the current high.

To the downside, gold prices need to break the lower support at 1497 convincingly in order to decline further. The lower support at 1440 is within reach. It is therefore possible that we could maintain the view of a downside correction.

Making sense of crude oil prices

Oil prices continue to remain weak as the brief knee-jerk reaction fades. News that Saudi Arabia plans to return to full production capacity, sooner than expected add pressure to oil prices. Along with this, the global narrative of slowing growth remains one that gives a bearish outlook for oil.

The initial breakout in oil prices saw a break of the falling trend line. However, failure to rebound off this breakout saw prices falling back below this trend line. In the process, we are currently watching the rising wedge pattern. Oil remains range bound within 60.64 and 50.00 level.

But the fact that the psychological level of 50.00 was tested rather briefly, combined with the bearish chart pattern suggests near term declines. A breakout from the lower trend line of the rising wedge pattern will confirm this view.

EURUSD forming a bullish divergence

The currency pair has been rather sluggish for the most part. However, price action looks to have built up the bearish momentum. The EURUSD continued to extend declines after initially slipping to support area of 1.0926. This rebound led to a lower high later.

At the time of writing, the EURUSD is seen retesting this same support area. However, watching the Stochastics, there is a possibility that we could see a short term rebound. The lower low in price is not coinciding with the higher lower on the Stochastics. This could potentially signal a bounce.

Considering that the near-term upside is seen at 1.1129 – 1.1111 region, the currency pair has the potential to rise back. But a lot will depend also on how the EURUSD will close near the support level. Price will need to post a convincing close at least above daily highs of 1.0967 to establish the upside bias.