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Gold Prices May Break Critical Chart Support on US GDP Data

Gold Prices May Break Critical Chart Support on US GDP Data

2018-04-27 02:30:00
Ilya Spivak, Head Strategist, APAC
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GOLD & CRUDE OIL TALKING POINTS:

  • Gold, crude oil prices drop as dovish ECB stokes US Dollar rally
  • All eyes on Q1 US GDP data before next week’s FOMC meeting
  • Upside surprise may push gold through critical 2018 range floor

Gold prices plunged after a drop in the EUR/USD exchange rate echoed as broad-based US Dollar strength across the financial markets, weighing on the standby anti-fiat alternative. The move was sparked by a chastened tone from ECB President Mario Draghi, who signaled the central bank is far from settled on whether unwinding QE asset purchases is in the cardsthis year.

Crude oil prices likewise at the hands of the greenback’s ECB-inspired surge. The sentiment-sensitive WTI benchmark had been tracking share prices higher when Mr Draghi’s comments hit the wires and promptly turned lower. Oil prices are denominated in terms of the US currency on global markets, so it seems hardly surprising that an outsized move there made impression.

US GDP DATA MAY HURT COMMODITY PRICES

Looking ahead, the US GDP data is firmly in focus. The annualized growth rate is expected to register at 2 percent in the first quarter after, down from 2.9 percent in the final three months of 2017. Leading PMI survey data hints otherwise however, hinting at the possibility for an upside surprise. US data outcomes have also improved relative to forecasts in recent weeks, bolstering the case for a rosier result.

A better-than-expected GDP print may amplify bets on an accelerated Fed interest rate hike cycle, a theme already developing across financial markets. That seems likely to push the US Dollar higher still, punishing commodities at large. Follow-through may be somewhat restrained by the proximity of next week’s FOMC monetary policy announcement however.

See our quarterly gold price forecast to learn what will drive the trend through mid-year!

GOLD TECHNICAL ANALYSIS

Gold prices broke minor support marked by the March 29 lowat 1321.37 to expose the long-standing range floor at 1307.63. This barrier is reinforced by the 23.6% Fibonacci retracement at 1308.65. A break downward would open the door for a test of major trend line support set from December 2016, now at 1280.26. Alternatively, a move back above 1321.37 initially targets support-turned-resistance at 1333.42.

Gold Daily Price Chart

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to consolidate after topping below the $70/bbl figure, as expected. A break below the near-term range floor at 67.36 exposes support-turned-resistance at 66.22. The upside continues to be capped by the April 19 high at 69.53, with a conclusive break above that needed to invalidate bearish overtones in near-term positioning.

Crude Oil Price Chart

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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