Gold futures closed higher last week, confirming the previous week’s closing price reversal bottom. The market was driven higher by a drop in U.S. Treasury yields. This move made the U.S. Dollar a less-desirable investment, while driving up demand for dollar-denominated gold. Helping to put a cap on gold prices was increased demand for higher risk assets.
Last week, April Comex gold settled at $1302.90, up $3.60 or +0.28%.
This week’s price action will likely be driven by the U.S. Dollar’s response to the U.S. Federal Reserve’s interest rate and monetary policy decisions as well as the Federal Open Market Committee’s economic projections. A dovish Fed could drive gold prices sharply higher. The Fed, for example, could reduce the number of potential rate hikes this year.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. However, momentum is trending lower. A trade through $1280.80 will negate a closing price reversal bottom and signal a resumption of the counter-trend sell-off. A trade through $1349.80 will signal a resumption of the uptrend.
Gold is currently trading inside a major long-term retracement zone at $1293.60 to $1319.70. This zone is controlling the longer-term direction of the market.
The main range is $1209.30 to $1349.80. Its retracement zone at $1279.60 to $1263.00 is the primary downside target. Since the main trend is up, buyers could come in on a test of this zone.
The short-term range is $1349.80 to $1280.80. Its retracement zone at $1315.30 to $1323.40 is the primary upside target. This zone surrounds the major Fibonacci level at $1319.70, making this area an important potential resistance cluster. Aggressive counter-trend sellers could come in on a test of this area.
Weekly Technical Forecast
Based on last week’s price action and the previous week’s closing price reversal bottom at $1280.80, the direction of the April Comex gold market this week is likely to be determined by trader reaction to the major 50% level at $1293.60.
A sustained move over $1293.60 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a rally into a potential resistance cluster. The first target is a short-term 50% level at $1315.30. This is followed by a downtrending Gann angle at $1317.80, a major Fibonacci level at $1319.70 and a short-term Fibonacci level at $1323.40.
The latter is a potential trigger point for an acceleration to the upside with the next target angle coming in at $1333.80. This is another trigger point for a potential acceleration into a long-term resistance angle at $1344.20. This angle stopped the rally at $1349.80 on February 22.
A failure to hold $1293.60 will signal the presence of sellers. A failure to hold this level could trigger a spike into a long-term uptrending Gann angle at $1281.30, a closing price reversal bottom at $1280.80 and a 50% level at $1279.60. Since the trend is up, buyers could come in on a test of this area.
If $1279.60 fails as support then look for a steep break into the Fibonacci level at $1263.00.
This article was originally posted on FX Empire
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