Gold Prices Pull Back as US-China Trade War Softens: Support in Sight
Gold Price Outlook:
- The bullish theme in Gold has remained despite overbought readings from a number of vantage points, owing to a potent combination of fundamental factors.
- One of those factors that’s been especially worrisome of late seemed to soften overnight. This has helped Gold prices to pull back but, this may not yet be enough to create a larger long-term reversal in the yellow metal.
- DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
The bullish trend in Gold continued at the start of this week as prices pushed up for another fresh six-year-high. Gold touched up to 1555 this week with Gold futures touching 1565 shortly after the weekly open. That early-week strength soon pulled back and prices found support ahead of the US open on Monday. That support held into Tuesday and buyers began to push again mid-week. Gold prices again touched the 1550 level in a brief fashion earlier this morning, pulling back after news of a softening in the ongoing US-China trade war began to take hold.
Prices are now pulling below the bullish trend that held through Tuesday and Wednesday, with support potential remaining at the same 1527 level that came into play on Monday.
Gold Price Hourly Chart
Taking a step back and there could be scope for a deeper pullback here, particularly considering the fundamental backdrop with a softening in the Trade War theme. That scenario helped to perk prices higher earlier this month on the announcement of fresh tariffs on China, and even as those tariffs were walked back bulls remained aggressive on the bid.
But, at this point, RSI on the Daily has continued to diverge as resistance as held, and this goes along with the most overbought readings for that indicator on the weekly chart since 2011, right around the time that Gold prices topped-out above the 1900 level.
Gold Price Daily Chart
Support Potential in Gold
Given the strength of the now three-month-old trend combined, short-side strategies may still be difficult to work with. Traders may still prefer to move-forward with a bullish bias until greater evidence of reversal presents itself; but there are nearby points of potential support that can continue to be used for short-term strategy. At 1527-1528 is the support level looked at on Monday. That zone held into Tuesday trade before prices launched-up for a re-test of 1550.
A bit deeper is another Fibonacci level of interest at 1509 as this is the 61.8% retracement of the 2012-2015 major move; and below that is the support level that held last week’s lows through a couple of different tests around the 1492.70 level.
Gold Price Four-Hour Chart
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.