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Gold Price Chart Hints at Topping as Powell Testimony Continues

Gold Price Chart Hints at Topping as Powell Testimony Continues

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices fail to capitalize as US Dollar falls on Day 1 of Powell testimony
  • Technical positioning hints at topping ahead of Powell’s 2nd day in Congress
  • Crude oil prices eye EIA inventory data, sentiment trends for direction cues

Gold prices edged up, but the move higher was surprisingly muted even as comments from Fed Chair Jerome Powell weighed on the US Dollar. That might have been expected to offer a lift to the standby anti-fiat alternative. As happened, the metal idled in a narrow congestion range carved out since minutes from January’s FOMC meeting sent prices sharply lower.

That seems appropriate enough: Mr Powell stuck to the same “wait-and-see” rhetoric featured in the FOMC minutes, leaving priced-in policy outlook implied in Fed Funds futures and its immediate reflection – Treasury bond yields – essentially unchanged. That makes the Greenback’s decline appear to be more incongruous than gold’s indecision.

Looking ahead, another day of testimony from the Fed Chair is ahead. Having dispensed with the Senate yesterday, he is now due in the House of Representatives. His opening remarks ought to be broadly unchanged from the prior outing, but the Q&A that follows may tease out more market-moving tidbits. It remains to be seen whether a clear directional signal is to be had therein however.

CRUDE OIL PRICES EYE EIA INVENTORY DATA, SENTIMENT TRENDS

Meanwhile, crude oil prices corrected gently higher as financial markets digested yesterday’s outsized drop. From here, official EIA inventory flow data is expected to show stockpiles added 2.94 million barrels last week. A leading estimate from API revealed a 4.2-million-barrel drawdown however. If that proves to foreshadow a supportive surprise on the incoming release, prices may be pressured higher.

Broad-based sentiment trends remain important as well. Indeed, the correlation between the benchmark WTI contract and S&P 500 futures – a bellwether for global risk appetite – looks firm at 0.75 (on rolling 20-day studies). That means a perceived dovish streak from Mr Powell might brighten investors’ mood and thereby lift crude prices alongside stocks, while a seemingly hawkish tone could send both lower in tandem.

Learn what other traders’ gold buy/sell decisions say about the price trend!

GOLD TECHNICAL ANALYSIS

Gold prices are marking time above rising trend support guiding the move higher from mid-November, with a bearish Evening Star candlestick pattern and negative RSI divergence hinting that a top is taking shape. A dense layer of support runs through 1249.10, with a breach below that confirmed on a daily closing basis exposing 1276.50. Alternatively, a move above the February 20 high at 1346.75 sets the stage to challenge trend-defining resistance in the 1357.50-66.06 area.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices paused at support in the 55.37-75 area after retreating from resistance in the 57.96-59.05 zone, as expected. Support is reinforced by a trend line set from late December, now at 54.59. A daily close below that would suggest the dominant decline from early October 2018 has resumed. Initial support thereafter is in the 50.15-51.33 zone. Alternatively, a push above 59.05 region targets trend line support-turned-resistance from February 2016, presently at 61.98.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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