Gold: Overbought conditions combined with bearish outside day candle back further downside
The yellow metal dropped nearly 1.50% and settled at $2035 on Friday. Heading into a fresh week, gold remains on the defensive amid a broadly subdued US dollar. Technical indicators signal further correction in the offing but gold’s downside remains capped as the US dollar struggles with its recovery, FXStreet’s Dhwani Mehta reports.
Key quotes
“The haven demand for the US currency could resurface, as uncertainty over the US fiscal aid looms even after President Trump signed coronavirus relief orders on Saturday. House Speaker Pelosi and Treasury Secretary Steven Mnuchin said they were open to restarting COVID-19 aid talks.”
“The escalation in the US-China tensions following the ban on the Chinese tech-titans could likely bode well for the US dollar and cap the upside attempts in gold. Also, investors remain wary ahead of the US CPI release and August 15 trade talks between the world’s two biggest economies.”
“A potential bear pennant formation is spotted on the hourly chart, which is a bearish continuation pattern. Acceptance under $2023 will confirm the pattern, opening doors for a test of Friday’s low at $2015. The next support at Wednesday’s low of $2009 will be tested, as the sellers eye for a break below $2000. The hourly-RSI remain in the bearish territory at 41.00, suggesting more room for losses.”
“Gold bulls need clearance above the bearish 21-hourly Simple Moving Average (HMA) at $2040 to regain control. However, a sustained move above the horizontal 50-HMA at $2050 is needed to revive last week’s bullish momentum for a rally towards the record highs above $2075.”
Author
FXStreet Team
FXStreet
