Welcome to Technical Tuesday, a weekly report where we highlight some of the most interesting markets that will hopefully appease technical analysts and traders alike.
In this week’s edition, we are getting technical on GOLD, SILVER and EUR/USD. So, there’s something for everyone.
Gold creates hammer but needs to go back above 200 MA
After Monday’s recovery it was always about follow-through for gold.
So far, the metal has failed to bring out buyers in a meaningful way despite printing a hammer candle on the daily on Monday:
Gold prices bounced back sharply off the $1800 support level as yields dipped and the dollar buying paused. However, yields have since resumed higher and this has prevented gold form rising even more. But all hope is not lost. The metal may still be able to regain its poise on haven demand. As traders, though, we are not taking any chances. We want to see evidence the market has bottomed or at least there are strong signals to suggest that might be the case. For me, a break back above the broken trend line and 200-day average is a prerequisite before I potentially turn bullish on gold again. Specifically, a potential break north of $1860 – the most recent high – could be the trigger I am looking for. Otherwise, “guilty until proven innocent,” is how I am approaching gold.
Silver in the spotlight
Silver’s comeback also puts it in the spotlight as traders consider whether it will be able to reclaim a key support area circa $22.00, or whether the sellers will step up here again.
As the chart shows, the area below $22.00 has acted as significant support in the past. But the recent breakdown below this hurdle means bullish traders will be wary of further weakness and as such they will be hesitant to step back in until the chart confirms the reversal. So, what we are looking at here is a potential bullish reversal. If silver manages to climb and hold above the broken support area mentioned, then this would confirm the reversal. Otherwise, I wouldn’t rule out the potential for a drop to $20.
EUR/USD provides bulls some hope
Mirroring the price action on gold and silver, this hourly chart of the EUR/USD shows price has potentially formed a short-term low.
As per the chart, the shaded region between 1.0470 to 1.0500 was previously support and when it broke down we saw a sharp move lower. The rounded retest of this area should have offered some resistance. However, it didn’t. This begs the question, are the bears the trapped group of speculators? If so, we may see a run towards the most recent high above 1.0640 where I would imagine buy stops are undoubtedly resting.
Incidentally, a move north of the 1.0640 would also lift rates above the March 2020 low, and thus create a potential longer term low.
However, if rates come back down and break the above-mentioned support zone below 1.0470, then all bets are off again. This would be bearish and as such a drop to the January 2017 low at 1.0340 would then not surprise me.