Gold Technical Analysis – The breakout of the range triggered a rally

July 4, 2024 10:25 am

Fundamental
Overview

Yesterday, gold broke out of the recent range and extended the rally following
some weak US data. In fact, the Continuing
Claims
rose to a new high and the ISM
Services PMI
hit a new cycle low. That made the real yields to drop and
gold to accelerate to the upside. This has been the case for a couple of years now
where a rise in real yields sees a much smaller fall in gold compared to a fall
in real yields which triggers a bigger rally.

As of now, it looks like gold have limited downside but lots of upside as
inflation abates slowly while risks to the growth picture increase the longer
the Fed keeps policy restrictive. In the short-term, strong US data might weigh
a bit on the market, but in the long-term weak data is likely to trigger bigger
upside moves.

Gold
Technical Analysis – Daily Timeframe

Gold Daily

On the daily chart, we can
see that gold continues to maintain an overall rangebound price action,
although the bias remains bullish. From a risk management perspective, the buyers
will have a better risk to reward setup around the key 2277 support zone where we can also find the 38.2% Fibonacci retracement level for confluence.

The sellers, on the other
hand, will want to see the price breaking below the support to change the bias
and increase the bearish bets into the next support around the major trendline, although we will need very strong
US data to trigger such a big correction.

Gold Technical Analysis
– 4 hour Timeframe

Gold 4 hour

On the 4 hour chart, we can
see that the price yesterday broke out of the recent range between the 2320
support and the 2337 resistance, and extended the rally to the 2360 level as
the buyers piled in on the breakout and increase the bullish bets on the weak
US data.

If we get a pullback from
here, we can expect the buyers to step in around the 2340 level where we can
find the confluence of the previous resistance
now turned support
and the minor trendline. The sellers, on the other hand
will need to see the price falling below the 2320 level to turn the bias more
bearish and extend the correction into the key 2277 support.

Gold Technical Analysis
– 1 hour Timeframe

Gold 1 hour

On the 1 hour chart, we can
see that the price action is now confined in what could turn out to be a bullish
flag
. A breakout to the upside will likely trigger another extension to the
upside with the 2387 level as the target. A breakout to the downside, on the
other hand, should provide the pullback into the 2340 level next. The red lines
define the average daily range for today.

Upcoming
Catalysts

Tomorrow we conclude the week with the US NFP report where the data is expected
to show 180K jobs added in June and the Unemployment Rate to remain unchanged
at 4.0%.

See the video below

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