Gold Price Analysis: Could this trendline break lead to lower levels?

Gold Price Analysis: Could this trendline break lead to lower levels?

  • Gold has pulled away from best levels despite another round of poor data from the US.
  • On the 4-hour chart, there is a trendline to look out for and a break could give us clues.

Gold fundamental backdrop

Gold has just pulled away from its best levels on Thursday afternoon after hitting the high of USD 1747.82 two sessions ago. Today there has been some poor data once again in the US. This week's initial jobless claims hit 5,245K vs market expectations of 5,105K but the previous number was revised up to 6,615K. Although this was a bad result it was within the forecast range predicted by analysts. After an initial spike higher in stocks, the market has pulled back a bit this has also sent gold lower at a time the safe-haven asset should be in demand. Maybe another entry opportunity on the way?

Over the last three weeks, every time the claimed rose above forecasts the S&P 500 finished higher and today S&P futures are down under 0.20%. It does feel like a market trap but let's see how the market finishes up. 

Back to the coronavirus, Italy recorded 525 deaths versus 578 yesterday so it seems the slowing in death rates is kicking in now. In the UK the government announced an extension of the lockdown by 3 more weeks and it was said that 91 percent of Brits support the lockdown being extended according to YouGov. 


Technical backdrop

You can see from the 4-hour chart below there has been a very decent run in gold over the past few weeks. On the daily chart, there has been a divergence which could indicate the trend might slow down and have a small retracement. This led me to look for clues of the small timeframes and on the 4-hour below if the black trendline breaks there could be a move down to one of the Fibonacci retracement support zones. The area in the blue rectangle looks pretty strong and it holds above the USD 1600 psychological support area at USD 1634.00. If the price does move there it could also come in contact with eh 4-hour 200 simple moving averages and the more traffic the better the level. Of course, these are just projections and the market could still move higher at a quick speed but very rarely is there never any pullback.

 

Source FxStreet

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