Gold currently trades at $2,381, marking a modest increase of 0.10%. It hovers slightly above today’s pivot point at $2,363.79, hinting at a restrained bullish sentiment. Immediate resistance is positioned at $2,403.98, with further ceilings at $2,431.98 and $2,459.86.

On the downside, support lies at $2,323.92, extending to $2,296.85 and $2,268.55, which could come into play should the trend reverse. The technical landscape shows the 50-Day Exponential Moving Average (EMA) at $2,359.342, slightly below the current price, suggesting potential near-term support.

Conversely, the 200-Day EMA at $2,251.548 underscores a longer-term upward trend. Today’s candlestick pattern, characterized by a long shadow and small body—an inverted hammer—signals potential weakness in the ongoing bullish trend.

Conclusion: The outlook for gold remains bullish above the pivot of $2,363.79, with any breach below this level potentially catalyzing a sharp decline in prices.

Choppy Moves While in Consolidation

Until natural gas breaks out of the pennant consolidation pattern trading will likely be choppy and difficult to predict, as with any consolidation period. Volatility can be expected to decline as the pennant narrows the trading range as the apex of the triangle is approached.

Further, the three moving averages representing different time frames of 8-Day, 20-Day, and 50-Day have converged. This is another indication of low volatility. How natural gas behaves when testing the upper or lower boundary lines will provide clues as you whether a breakout to the upside or downside may occur.

Consolidation Could Continue for Weeks

The pattern is bearish since natural gas remains in a downtrend and there was a sharp decline prior to the formation of the pennant. Nevertheless, it is not determined until a breakout occurs. A breakout either up or down should occur before the apex is reached. This means that trading within the pennant could go on for as long as more seven weeks. Regardless, a breakout could occur at any time as the pennant is already well defined.

8-Week Moving Average Recaptured

It is interesting to note that there was a breakdown from last week’s bearish shooting star candlestick pattern (not shown) before this week’s low of 1.65 was reached, leading to a bounce. Also, the 8-Week MA, which had marked support for the last two weeks was broken to the downside. Today’s advance has recaptured the 8-Week MA, a sign of strength. Confirmation of strength will be provided on a daily close above the current price for the 8-Week MA at 1.75. Natural gas exceeded that level today.

For a look at all of today’s economic events, check out our economic calendar.

FXEmpire.com – Natural gas further consolidates on Wednesday within a bear pennant pattern. It is on track to end the day as a relatively narrow inside day. Yesterday’s low of 1.65 approached a test of support at the lower trendline of a developing bear pennant consolidation pattern. This week’s decline has clarified that pattern as an attempt to hold support above the 50-Day MA and long-term trendline failed earlier this week.

Declining Volatility Likely to Continue

Volatility has been declining and it will likely continue to fall as natural gas further trades inside the small triangle pattern with a narrowing price range. The decline in volatility is also indicated by the three moving averages that have converged. The 8-Day, 20-Day, and 50-Day have come together.

What follows a period of low volatility is a clear increase in volatility. That will likely happen upon a breakout of the pennant. Natural gas remains in a clear downtrend and there was a relatively sharp decline prior to the pennant consolidation pattern. However, the downside may be limited.

29-Year Low is 1.44

In June 2020 a low of 1.44 was reached and price was quickly rejected to the upside. Natural gas traded below the prior support level of 1.52 for only one day before buyers took back control and the early stages of an advance began. That is the lowest price that natural gas has traded at in approximately 29 years. This means that 1.52 is a key low price to watch if a breakdown from the pennant occurs. Given the quick rebound off the 1.44 price level it seems unlikely that that price area will be tested again as support. Nevertheless, it is always a possibility.

Breakdown Signal

Until it is clear that Tuesday’s low of 1.65 is going to be a swing low, a breakdown is triggered on a drop below the earlier swing low at 1.59. It is confirmed on a daily close below that price level. Otherwise, support is likely to continue to be seen near the lower boundary line with trading contained within the pattern. Such a low volatility environment is likely to keep some traders on the sidelines until price breaks out.

Upside Trigger

Although the bear pennant is considered a trend continuation pattern, it is not valid until a breakout is triggered. Therefore, an eventual upside breakout remains a possibility. An upside breakout is triggered on a move above the recent swing high of 1.94. The next time that a bullish breakout could occur would be on the next rally towards the top of the pattern if it does occur.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

• XAU/USD resumes its upside bias amidst geopolitical jitters.
• Rising US yields should limit the metal’s upside potential.
• The central bank’s divergence remain in centre stage.

Prices of the yellow metal left behind two consecutive daily pullbacks and posted decent gains on Thursday, although another test or surpass of the $2,400 mark per troy ounce remained elusive.

On another front, the US markets kicked off the session in a mixed tone amidst dominating risk-off sentiment that saw the Greenback regain its composure following Wednesday’s marked retracement. A glimpse to other markets showed Asian stocks edging higher and European equities trading mostly on the defensive, while market participants continued to assess the financial meeting between the US, Japan, and South Korea, where these countries pledged to “engage in close consultation” regarding FX markets, after concerns from Tokyo and Seoul regarding the recent significant depreciation of their currencies.

Furthermore, the move higher in bullion came exclusively on the back of escalating geopolitical tensions in the Middle East after Israel is contemplating retribution against Iran after the latter launched a huge attack over the weekend.

In the meantime, US yields regained their smile and rose across the curve, maintaining their trade in the upper end of the recent range

XAU/USD short-term technical outlook

XAU/USD regains the upside traction and approaches the $2,400 mark, showing some near-term consolidation for the time being. Technical indicators retreat from extreme overbought levels, suggesting that some decline may lie ahead in the short term. Still, a steeper slide remains out of the picture, as XAU/USD refuses to give up while developing its moving averages above all. On this, the 55-day SMA hovers around $2,150 while the 100-day SMA tests the $2,100 zone.

The 4-hour chart shows XAU/USD moving further into a consolidative phase, which appears so far capped by the $2,400 level, while the 55-SMA holds the downside for the time being. The longer moving averages maintain their bullish slopes far below the current spot levels, while the Relative Strength Index (RSI) indicator points slightly southwards around 55.

 Support levels: 2,359.80 2,345.20 2,333.20

Resistance levels: 2,380.70 2,393.50 2,409.20 

• XAU/USD resumes its upside bias amidst geopolitical jitters.
• Rising US yields should limit the metal’s upside potential.
• The central bank’s divergence remain in centre stage.

Prices of the yellow metal left behind two consecutive daily pullbacks and posted decent gains on Thursday, although another test or surpass of the $2,400 mark per troy ounce remained elusive.

On another front, the US markets kicked off the session in a mixed tone amidst dominating risk-off sentiment that saw the Greenback regain its composure following Wednesday’s marked retracement. A glimpse to other markets showed Asian stocks edging higher and European equities trading mostly on the defensive, while market participants continued to assess the financial meeting between the US, Japan, and South Korea, where these countries pledged to “engage in close consultation” regarding FX markets, after concerns from Tokyo and Seoul regarding the recent significant depreciation of their currencies.

Furthermore, the move higher in bullion came exclusively on the back of escalating geopolitical tensions in the Middle East after Israel is contemplating retribution against Iran after the latter launched a huge attack over the weekend.

In the meantime, US yields regained their smile and rose across the curve, maintaining their trade in the upper end of the recent range

XAU/USD short-term technical outlook

XAU/USD regains the upside traction and approaches the $2,400 mark, showing some near-term consolidation for the time being. Technical indicators retreat from extreme overbought levels, suggesting that some decline may lie ahead in the short term. Still, a steeper slide remains out of the picture, as XAU/USD refuses to give up while developing its moving averages above all. On this, the 55-day SMA hovers around $2,150 while the 100-day SMA tests the $2,100 zone.

The 4-hour chart shows XAU/USD moving further into a consolidative phase, which appears so far capped by the $2,400 level, while the 55-SMA holds the downside for the time being. The longer moving averages maintain their bullish slopes far below the current spot levels, while the Relative Strength Index (RSI) indicator points slightly southwards around 55.

 Support levels: 2,359.80 2,345.20 2,333.20

Resistance levels: 2,380.70 2,393.50 2,409.20 

Declining Volatility Likely to Continue

Volatility has been declining and it will likely continue to fall as natural gas further trades inside the small triangle pattern with a narrowing price range. The decline in volatility is also indicated by the three moving averages that have converged. The 8-Day, 20-Day, and 50-Day have come together.

What follows a period of low volatility is a clear increase in volatility. That will likely happen upon a breakout of the pennant. Natural gas remains in a clear downtrend and there was a relatively sharp decline prior to the pennant consolidation pattern. However, the downside may be limited.

29-Year Low is 1.44

In June 2020 a low of 1.44 was reached and price was quickly rejected to the upside. Natural gas traded below the prior support level of 1.52 for only one day before buyers took back control and the early stages of an advance began. That is the lowest price that natural gas has traded at in approximately 29 years. This means that 1.52 is a key low price to watch if a breakdown from the pennant occurs. Given the quick rebound off the 1.44 price level it seems unlikely that that price area will be tested again as support. Nevertheless, it is always a possibility.

Breakdown Signal

Until it is clear that Tuesday’s low of 1.65 is going to be a swing low, a breakdown is triggered on a drop below the earlier swing low at 1.59. It is confirmed on a daily close below that price level. Otherwise, support is likely to continue to be seen near the lower boundary line with trading contained within the pattern. Such a low volatility environment is likely to keep some traders on the sidelines until price breaks out.

Upside Trigger

Although the bear pennant is considered a trend continuation pattern, it is not valid until a breakout is triggered. Therefore, an eventual upside breakout remains a possibility. An upside breakout is triggered on a move above the recent swing high of 1.94. The next time that a bullish breakout could occur would be on the next rally towards the top of the pattern if it does occur.

For a look at all of today’s economic events, check out our economic calendar.

Geopolitical Tensions and Market Reactions

With increasing tensions in the Middle East, particularly Iran’s direct assault on Israel, the market’s reaction has been relatively measured in terms of oil prices. The U.S. administration’s careful approach to imposing severe sanctions against Iran aims to prevent sharp price increases and potential disagreements with China, thus avoiding the usual rise in oil markets following such geopolitical events.

U.S. Inventory Data and Strategic Reserves

The American Petroleum Institute (API) reported a significant uptick in U.S. crude inventories, with an increase of about 4.09 million barrels last week, far surpassing expectations. This rise suggests a temporary relief in supply concerns. Conversely, reductions in gasoline and distillates stockpiles indicate strong fuel demand which supports refinery operations.

Additionally, today’s pending report from the Energy Information Administration (EIA) will be critical in confirming these trends and could sway market directions. Regarding policy, the U.S. has halted repurchases for the Strategic Petroleum Reserve due to elevated oil prices, reflecting a strategic decision to manage national reserves efficiently.

Short-term Market Forecast

The latest API data shows a significant build in U.S. crude inventories, a bearish indicator suggesting an oversupply. Coupled with the anticipated EIA report, this development overshadows otherwise bullish factors such as strong U.S. fuel demand and geopolitical risks.

Global economic uncertainty is causing investors to exercise caution, dampening potential price spikes. Expect oil prices to remain subdued, with the market’s current bearish tilt likely keeping price movements within a confined range in the short term. This period calls for a conservative approach, given the prevailing economic and supply conditions.

Technical Analysis

XAU/USD Current price: $2,370.03

• Financial markets struggle with sentiment amid Middle East tensions, on-hold central banks.
• US Government bond yields are in retreat mode after reaching fresh 2024 highs.
• XAU/USD giving modest signs of an imminent bearish correction.

Spot Gold eased on Wednesday after being unable to surpass the $2,400 mark for a second consecutive day. The US Dollar trades marginally lower against its major rivals despite resurgent risk aversion following Wall Street’s opening. Asian stocks traded mixed, but European indexes were mostly up, as market players seemed to accept interest rate cuts in the United States (US) are on hold for now. However, US indexes quickly turned south at the beginning of the session, undermining the sentiment.

Tensions in the Middle East weigh on the mood. Israel is preparing some retaliation on Iran after the latter launched a massive attack over the weekend despite being advised against it. Furthermore, talks between Israel and Hamas to reach a cease-fire have been interrupted.

Meanwhile, US government bond yields are retreating. After flirting with 2024 highs, the 10-year Treasury note offers 4.60%, down 5 basis points (bps), while the 2-year note is down 4 bps, now yielding 4.92%

XAU/USD short-term technical outlook

XAU/USD trades near $2,370, and the daily chart shows that the slide may continue. Technical indicators retreat from extreme overbought levels, suggesting the decline may continue. Still, a steeper slide remains out of the picture, as XAU/USD refuses to give up while developing its moving averages above all. The 20 Simple Moving Average (SMA) maintains its firmly bullish slope at around $2,281 and roughly $300 above an also bullish 100 SMA.

The 4-hour chart shows XAU/USD extending its slide below a mildly bearish 20 SMA, which is also supportive of a downward extension. The longer moving averages maintain their bullish slopes far below the current level, but technical indicators support the bearish case. The Relative Strength Index (RSI) indicator is extending its slide sub-50, while the Momentum indicator heads firmly south but still above its midline.

 Support levels: 2,359.80 2,345.20 2,333.20

Resistance levels: 2,380.70 2,393.50 2,409.20  

XAU/USD Current price: $2,370.03

• Financial markets struggle with sentiment amid Middle East tensions, on-hold central banks.
• US Government bond yields are in retreat mode after reaching fresh 2024 highs.
• XAU/USD giving modest signs of an imminent bearish correction.

Spot Gold eased on Wednesday after being unable to surpass the $2,400 mark for a second consecutive day. The US Dollar trades marginally lower against its major rivals despite resurgent risk aversion following Wall Street’s opening. Asian stocks traded mixed, but European indexes were mostly up, as market players seemed to accept interest rate cuts in the United States (US) are on hold for now. However, US indexes quickly turned south at the beginning of the session, undermining the sentiment.

Tensions in the Middle East weigh on the mood. Israel is preparing some retaliation on Iran after the latter launched a massive attack over the weekend despite being advised against it. Furthermore, talks between Israel and Hamas to reach a cease-fire have been interrupted.

Meanwhile, US government bond yields are retreating. After flirting with 2024 highs, the 10-year Treasury note offers 4.60%, down 5 basis points (bps), while the 2-year note is down 4 bps, now yielding 4.92%

XAU/USD short-term technical outlook

XAU/USD trades near $2,370, and the daily chart shows that the slide may continue. Technical indicators retreat from extreme overbought levels, suggesting the decline may continue. Still, a steeper slide remains out of the picture, as XAU/USD refuses to give up while developing its moving averages above all. The 20 Simple Moving Average (SMA) maintains its firmly bullish slope at around $2,281 and roughly $300 above an also bullish 100 SMA.

The 4-hour chart shows XAU/USD extending its slide below a mildly bearish 20 SMA, which is also supportive of a downward extension. The longer moving averages maintain their bullish slopes far below the current level, but technical indicators support the bearish case. The Relative Strength Index (RSI) indicator is extending its slide sub-50, while the Momentum indicator heads firmly south but still above its midline.

 Support levels: 2,359.80 2,345.20 2,333.20

Resistance levels: 2,380.70 2,393.50 2,409.20  

 

Crude oil appears toppy after a mammoth rally since February, unable to push higher despite some seriously strong tailwinds stemming from geopolitics, supply curbs and ongoing strength in the US economy. While there are obvious fat tail risks that could lead to substantial price spikes, if they don’t materialise, it suggests crude may need to move lower before moving higher again.

Crude oil underpinned by strong macro tailwinds

Blockages of shipping routes in the Middle East, potential damage to energy infrastructure from conflict, additional sanctions on Iran impacting global supply. Those risks are now partially priced into crude oil which, along with ongoing supply curbs from OPEC members and Russia, have contributed to a 22% rally since early February.

While they’re unlikely to dissipate soon and could lead to huge upside if the geopolitical situation were to worsen, the recent price action has not been overly bullish, in part due to a stronger US dollar and concerns the Fed may keep interest rates unchanged well into the second half of 2024, increasing the risk of an economic.

But price action has been suspect recently

Twice WTI has ventured above $87.50 this month only to be knocked lower, including a sizeable reversal last Friday. While it continues to find bids on dips below $84.70, the inability to push higher has seen the price squeeze up against uptrend support today. While it’s only a minor trendline, it can be used to base trade ideas around, depending on how the price evolves.

Should it break lower, traders could sell below $84.70 with a stop above looking for an unwind to $83 or even $80.30. Should the price move towards Monday’s low at $84, consider lowering your stop to entry level, providing a free-hit at downside.

Even though long positions held by traders are not yet at extreme levels, according to the latest COT report, there has been an uptick in recent weeks, adding to the risk that downside could initiate forced selling among those who recently joined the rally.

Even though near-term risks appear skewed to the downside, if the price doesn’t play ball the idea can be flipped around, allowing for traders to buy the dip with a stop below $84.70 for protection. The initial target would be the double-top at $87.65 with $89.50 the next level after that.

Managing near-term headline risk

From a fundamental perspective, geopolitical developments will continue to play an outsized roll in dictating price, so make sure your stops are placed so that they limit the damage if the trade moves against you, especially if going short.

Among known events, US crude oil inventory will be released by the energy Information Administration later Wednesday. Markets look for a modest build with stocks of gasoline and distillates expected to decline.

Read the latest issue of the OGV Energy magazine HERE

Published: 17-04-2024

XAU/USD Current price: $2,370.03

• Financial markets struggle with sentiment amid Middle East tensions, on-hold central banks.
• US Government bond yields are in retreat mode after reaching fresh 2024 highs.
• XAU/USD giving modest signs of an imminent bearish correction.

Spot Gold eased on Wednesday after being unable to surpass the $2,400 mark for a second consecutive day. The US Dollar trades marginally lower against its major rivals despite resurgent risk aversion following Wall Street’s opening. Asian stocks traded mixed, but European indexes were mostly up, as market players seemed to accept interest rate cuts in the United States (US) are on hold for now. However, US indexes quickly turned south at the beginning of the session, undermining the sentiment.

Tensions in the Middle East weigh on the mood. Israel is preparing some retaliation on Iran after the latter launched a massive attack over the weekend despite being advised against it. Furthermore, talks between Israel and Hamas to reach a cease-fire have been interrupted.

Meanwhile, US government bond yields are retreating. After flirting with 2024 highs, the 10-year Treasury note offers 4.60%, down 5 basis points (bps), while the 2-year note is down 4 bps, now yielding 4.92%

XAU/USD short-term technical outlook

XAU/USD trades near $2,370, and the daily chart shows that the slide may continue. Technical indicators retreat from extreme overbought levels, suggesting the decline may continue. Still, a steeper slide remains out of the picture, as XAU/USD refuses to give up while developing its moving averages above all. The 20 Simple Moving Average (SMA) maintains its firmly bullish slope at around $2,281 and roughly $300 above an also bullish 100 SMA.

The 4-hour chart shows XAU/USD extending its slide below a mildly bearish 20 SMA, which is also supportive of a downward extension. The longer moving averages maintain their bullish slopes far below the current level, but technical indicators support the bearish case. The Relative Strength Index (RSI) indicator is extending its slide sub-50, while the Momentum indicator heads firmly south but still above its midline.

 Support levels: 2,359.80 2,345.20 2,333.20

Resistance levels: 2,380.70 2,393.50 2,409.20  

Geopolitical Impact on Silver

The recent military actions between Iran and Israel, marking the first such aggression in over three decades, have stoked fears of a broader conflict, prompting investors to turn to silver as a safe-haven asset. The movement in silver prices is predominantly driven by these geopolitical events.

Economic Indicators and Federal Reserve’s Stance

The surge in U.S. retail sales indicates a robust economic momentum as Q1 concluded, which has adjusted expectations around the Federal Reserve’s monetary policy. The market has now scaled back its anticipation of interest rate cuts, expecting fewer adjustments by year-end. Federal Reserve Chair Jerome Powell emphasized the necessity of maintaining restrictive monetary policy longer to manage inflation and economic strength, which has influenced both the dollar’s strength and Treasury yields.

Challenges to Upward Momentum

In the short term, silver prices might face downward pressure as the initial geopolitical premium dissipates. However, ongoing central bank purchases of gold bullion provide a floor to potential declines in silver. The strategic nature of these purchases often makes them less sensitive to fluctuations in silver prices. Looking forward, the sustained high interest rate environment in the U.S. and a robust dollar may continue to challenge silver’s upward momentum.

Short-Term Market Forecast

Given the Federal Reserve’s current stance on interest rates and the ongoing economic strength in the U.S., the outlook for silver remains neutral in the near term. The dual pressure from a stronger dollar and higher yields could temper gains from safe-haven demand, likely leading to a stabilization or slight decrease in silver prices in the coming weeks.

Technical Analysis