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Will 20-Day Moving Average Support Hold?
So far, support has been seen near the lows of the day but there is no sign of strength that could lead to a rally. However, the day’s lows are around potential support represented by the 20-Day MA, now at $3,028. If support around the 20-Day line continues to hold, there is the potential for at least a bounce. Today is the first test of support around the 20-Day MA since it was reclaimed on March 12.
That first test can result in a reversal. However, A failure of the line to hold as support would provide another bearish signal. The next key potential support area is a little below the moving average at $2,999. That price range is derived from a previous higher swing low and the 50% retracement level. Moreover, there is a rising trendline around that price zone as well.
Resistance Holds at Top of Channels
Gold failed to break out above two rising parallel trend channels recently, one outlined on the chart in purple and the other with blue lines. Thursday’s rally was a new trend high and the fourth day that resistance was seen near the top line of the small blue channel. Also, today’s decline saw a definitive breakdown below the top purple channel line. A failed breakout through the top of the channel could eventually lead to a test of support near the lower end of the channel.
Downside Risk Dominates
Regardless of whether gold swings that far, the potential for further downside from current levels due to the signs of a bearish reversal from of two channels, raises downside risk. But first gold would need to fall below the 20-Day MA, then the 50% retracement. After that it should head towards the $2,961 price area, which includes the 61.8% Fibonacci retracement. Since gold would be below a rising trendline at that point, the 50-Day MA at $2,938 could surely be approached as well. Finally, this week is set to end with a potential bearish weekly shooting start candlestick pattern. A drop below $3,016 would be needed to trigger the pattern.
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