Gold Price Preparing For Next Crucial Break

Key Highlights

  • Gold price tested the $1,300 support area and later started consolidation against the US Dollar.
  • There is a breakout pattern formed with resistance at $1,314 on the 4-hours chart of XAU/USD.
  • The US CPI posted no change in Jan 2019 (MoM), whereas the market was looking for a 0.1% rise.
  • The US Retail Sales for Dec 2018 will be released today, which could increase 0.2% (MoM).

Gold Price Technical Analysis

After a significant upward move, gold price topped near the $1,325 level against the US Dollar. The price corrected below the $1,320 and $1,310 support levels before buyers appeared near $1,300.

Gold Price Technical Analysis

The 4-hour chart of XAU/USD indicates that the price traded as low as $1,302 and later started consolidating in a broad range. It recovered above the $1,310 level and the 38.2% Fib retracement level of the recent decline from the $1,326 high to $1,302 low.

However, the recovery was capped by the $1,315 resistance and the 50% Fib retracement level of the recent decline from the $1,326 high to $1,302 low.

The price started traded in a broad range below the $1,315 resistance and above the $1,300 support. More importantly, there is a breakout pattern formed with resistance at $1,314. If buyers gain strength above $1,314 and $1,315, there could be a bullish continuation towards $1,325.

On the other hand, if there is a downside break below the $1,302 support and the 100 simple moving average (red, 4-hours), then there could be an extended correction towards the $1,295 or $1,290 support level.

Recently, the US Consumer Price Index report for Jan 2019 was released by the US Bureau of Labor Statistics. The market was looking for a 0.1% rise in the US CPI in Jan 2019 compared with the previous month.

However, the result was lower than the forecast as there was no change in the US CPI. On the positive side, the last reading was revised up from -0.1% to 0.0%. Looking at the yearly change, there was a 1.6% increase in the CPI, better than the 1.5% forecast, but less than the 1.9% last.

US CPI Jan 2019

The report added:

The energy index declined for the third consecutive month, offsetting increases in the indexes for all items less food and energy and for food. All the major energy component indexes declined in January, with the gasoline index falling 5.5 percent. The food index increased 0.2 percent, with the index for food at home rising 0.1 percent and the food away from home index increasing 0.3 percent.

Overall, gold price seems to be preparing the next break, while major pairs like EUR/USD, GBP/USD and AUD/USD remain under bearish pressure.

Economic Releases to Watch Today

  • German Gross Domestic Product for Q4 2018 (YoY) (Preliminary) – Forecast 0.7%, versus 1.1% previous.
  • German Gross Domestic Product for Q4 2018 (QoQ) (Preliminary) – Forecast 0.1%, versus -0.2% previous.
  • Euro Zone Gross Domestic Product Q4 2018 (Preliminary) (QoQ) – Forecast 0.2%, versus 0.2% previous.
  • US Retail Sales Dec 2018 (MoM) – Forecast +0.2%, versus +0.2% previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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