August Comex Gold futures finished lower last week. The pressure started early in the week after a bad trade entry triggered a “flash crash”. The market never really recovered from last Monday’s steep decline.
Gold was pressured throughout the week by rising global yields. Yields rose after several central bankers joined the U.S. Federal Reserve in suggesting the need for monetary policy tightening. They included the European Central Bank, the Bank of England and the Bank of Canada.
Technical Analysis
The main trend is down according to the daily swing chart. It was reaffirmed on June 26 when sellers took out the swing bottom at $1241.70. A trade through $1260.00 will change the main trend to up.
Taking out last week’s low at $1236.50 will reaffirm the downtrend. The next major target is the May 9 bottom at $1217.80.
The main range is $1217.80 to $1298.80. Its retracement zone is $1258.30 to $1248.70. Gold has been straddling this retracement zone for several weeks. It is controlling the near-term direction of the market.
After straddling the lower or Fibonacci level at $1248.70 all last week, gold finally closed below this level on Friday. Sustaining this move should give gold a downside bias over the near-term.
The short-term range is $1298.80 to $1236.50. If buyers return and take out $1260.00 then this could generate enough upside momentum to challenge its retracement zone at $1267.70 to $1275.00.
Forecast
Based on Friday’s close at $1242.30, the nearest upside target is a resistance cluster at $1248.70 to $1248.00. Overtaking $1248.00 could trigger a breakout into the uptrending angle at $1255.80, followed by $1258.50 and $1260.00.
If the selling pressure continues then look for a test of a support cluster at $1236.80 to $1236.50. Look for an acceleration to the downside if $1236.50 fails. The next major targets are the uptrending angle at $1227.30 and the downtrending angle at $1222.80.
Crossing to the weak side of $1222.80 will put gold in a bearish position with the main bottom at $1217.80 the next major downside target.
Gold is also trading inside a triangle chart pattern. This is a breakout chart pattern. Look for a bullish bias to develop on a sustained move over $1248.00 and for a bearish bias to develop on a sustained move under $1236.80.
This article was originally posted on FX Empire