Gold Technical Analysis: Bearish Outside Bar Reversal Favors Drops

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Treasury yields decline as investors eye trade tensions. While the stock market remains worried with concerns of a drop or recession.

Alphabetastock.com report: Gold closed well below $1,504 on Monday, validating the bearish outside bar candlestick pattern created on Friday.

A bearish outside bar candle occurs when the price action for a specific day falls outside the high and low of the preceding day. That candlestick is widely considered a sign of indecision in the market place.

However, in Gold’s case, that pattern indicated bullish exhaustion. After all, the outside bar appeared following a near 90-degree rise from $1,400 to $1,535.

Traders usually wait for confirmation of bearish reversal, preferably in the form a close below the outside bar’s low.

As noted earlier, Gold found acceptance below $1,504 (outside bar’s low) on Monday, confirming a short-term bullish-to-bearish trend change.

Supporting the case for a drop to the immediate support of $1,480 (Aug. 13 low) is the impending bearish crossover on the moving average convergence.

The bearish case would be invalidated if prices rise above Monday’s high of $1,513. As of writing, the zero-yielding safe-haven metal is trading largely unchanged on the day at $1,495 per Oz.

Forex today was more favourable for risk-FX on, yet again, mixed trade headlines where on one hand, Trump said he wasn’t ready to do a deal with China yet the US confirmed a 90-day extension to US tech companies’ business with Huawei. Additionally, Germany and the US are contemplating fiscal stimulus.

While central banks are likely to be the next key focus with the Jackson Hole coming up as well as the FOMC minutes as well as the Reserve Bank of Australia’s today, geopolitics remains in the driving seat and volatility can be expected to continue. Economic contingency plans from Germany and talk of one from the White House which could be triggered in the event of a recession sounds good on paper but will unlikely to pair off the risks of a protracted trade war and desperate measures from central banks reacting to deteriorating economic activity.

The data was light, although the DXY got a boost from Boston Fed President Rosengren who dissented against the rate cut in July, advocating for the Fed to pause at this stage, bullish on the US economy and showing little concern for overseas doom and gloom. In turn, US 2-year Treasury yields climbed from 1.50% to 1.55% while the 10-year yield rose from 1.58% to 1.61%. Still, markets expect a rate cut as soon as September.

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Source: PressCable

Release ID: 88910093