Gold declined 0.63% against the USD and closed at $ 1459.26 per ounce on Friday, amid strength in the US dollar. In the Asian session, the pair XAU/USD is trading around $ 1465.
Gold traders are going to continue to follow the movement in US Treasury yields and the direction of the U.S. Dollar this week. Of particular interest will be the 10-year U.S. Treasury bonds reaction to the 2.06 percent yield (the high from August). Taking out this level could trigger a steep break in gold.
On the technical picture, given the series of doji’s, hammers and pin bars around the resistance 1519.65 it was apparent the level was a key focal point. Therefore, we warn that any weak break of this level increased the odds that price action remains in a complex correction. Yet it didn’t even break before bearish momentum returned.
The yellow metal is showing convergence with its 20-day MA and trading below its 50-day moving average on the hourly chart. Furthermore, on the daily chart the 20-day MA has crossed below the 50-day MA and both of them are now pointing lower. As the long-term bias is for an eventual break to new highs, the bearish bias is over the near-term, and will later seek evidence the correction from the 1557.07 high is nearing completion.
The bearish channel can be used to aid with profit objectives. If a deeper correction extend, we can also use the bullish trend line from the August low. That said, the 1381.91 -1400 zone should also be considered as potential support along the way.
Potential catalysts that could influence the price action next days are U.S.-China trade relations, reports on U.S. consumer inflation and retail sales, and two-days of testimony by Federal Reserve Governor Jerome Powell.
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The bearish channel support line holds and the price broke above the channel. Follow our next analysis...