Gold Confined In Descending Channel

Andreas Thalassinos
Andreas Thalassinos

23.2.2024

Gold is trading near the upper trendline of a descending channel, dominated by a rebounding dollar after recording six consecutive lower lows. However, the precious metal has encountered a confluence of resistance levels, posing a challenge to its upward trajectory and potential breakout. The resistance level at 2035.00, which coincides with the resistance calculated by the weekly Standard Pivot Points, has emerged as a significant barrier to the precious metal's upward momentum. Moreover, the Stochastic oscillator has generated an overbought alert, indicating the possibility of a downside in the near future. 

 

Overview

Gold is currently trading near the upper trendline of a descending channel, dominated by a rebounding dollar after recording six consecutive lower lows. However, the precious metal has encountered a confluence of resistance levels, posing a challenge to its upward trajectory and potential breakout. The resistance level at 2035.00, which coincides with the resistance calculated by the weekly Standard Pivot Points, has emerged as a significant barrier to the precious metal's upward momentum. Moreover, the Stochastic oscillator has generated an overbought alert, indicating the possibility of a downside in the near future. Traders are expected to closely monitor Gold in light of the forthcoming release of significant economic data that could potentially impact its direction.

Upcoming Economic Events

Tuesday        15:30(GMT):  CB Consumer Confidence
Wednesday  13:30 (GMT): Preliminary GDP (q/q)
Thursday      13:30 (GMT): Personal Consumption Expenditures
Thursday       13:00 (GMT): Unemployment Claims

Technical Analysis

After a brief rally from 1973.02 to 2088.43, the market experienced a decline as sellers took over, causing the value of the precious metal to drop. This led to a technical reversal to the downside, known as a failure swing. More specifically, the peak formed at 2062.26 failed to exceed the previous peak at 2088.43, indicating the weakness of the bulls to pull Gold to higher unchartered levels. Consequently, the prices fell below the key support level of 2013.28, paving the way for a downward trajectory.

The Moving Average indicator and the Momentum oscillator confirm the bearish outlook. Specifically, Gold is trading below its 50-period Moving Average line, and the Momentum oscillator has fallen below its baseline.

However, a decisive close above the upper trendline will drive  Gold to resume the upward trajectory.

Potential Downside Targets

2009.00: The initial downside target corresponds to the trough formed on January 25, which coincides with the weekly Pivot Point. 
2001.83: The second potential target is 2001.83, representing the lowest point reached on January 17.
1984.16: Subsequently, the following line of support is estimated at 1984.16, which corresponds to the last trough formed on February 14.
1973.02: Finally, the fourth price target can be determined from the trough formed on December 13.

Potential Upside Targets

In the  bullish scenario, three potential price targets may be calculated:

2035.33: The first price target is identified at 2035.33, which coincides with an internal trendline and aligns with the first resistance calculated by the weekly Standard Pivot Points methodology. 
2065.39: The second target is 2065.39, which corresponds to the peak established on February 1.
2078.89: The third price target denotes the year's highest value, which was recorded on January 2.

Conclusion and Considerations

In conclusion, the current trend in Gold is downwards, following a bearish bias that the release of economic data, the rebound of the dollar, and geopolitical events have amplified. However, a decisive breakout of the descending channel could signal a potential reversal of the trend and a move to the upside. Thus, it is essential to exercise caution and implement effective risk management strategies when operating in the financial markets. Additionally, staying abreast of economic events and geopolitical developments is crucial to making informed trading decisions in the market.
 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.