Gold sold off on Tuesday following the hot US CPI report as it lifted real yields and triggered a strong rally in the US Dollar. The market continues to trim rate cuts expectations as the economic data keeps on surprising to the upside. In the big picture, Gold should be supported by the expectations of a rate cut cycle, but it will need the short term picture to align or we will continue to see the market remaining under pressure.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold broke through the key support around the 2015 level following the hot US CPI report. The natural target for the sellers should be the 1972 level, but we can notice that the price is a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around the 2015 resistance where we can also find the confluence with the trendline and the 61.8% Fibonacci retracement level. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into the 2063 level.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been consolidating ever since the big drop from the US CPI report. We now have a minor resistance zone around the 1998 level which is what the buyers will need to break to start targeting the 2015 resistance next. The sellers, on the other hand, will keep on defending the level with a defined risk above it to position for a drop into the 1972 level.
Upcoming Events
Today we will see the latest US Jobless Claims figures and the US Retail Sales data, while tomorrow we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey. Strong data is likely to weigh on Gold, while weak figures should give it a boost.
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