Tuesday seems to be a new shift in US-EU trade relations since President Donald Trump postponed plans to impose steep trade tariffs on the European Union, potentially averting a costly trade war. Investors are eyeing the success of the U.S.’s trade relations with its major trading partners, which can shift the whole economic scenario and prevailing recessionary fear.
Undoubtedly, this shift has surged the bearish pressure in gold futures due to the strengthening US dollar and the weakening Japanese Yen due to falling long-dated Japanese bond yields.
However, investors are still indecisive about remaining invested in the yellow metal as gold has lost its safe-haven potential. The U.S. President could take more steps to diminish the denting impacts of his trade tariff policies on the other major trading partners.
Last week, gold futures continued to face selling pressure despite a bullish attempt on Friday to test the significant resistance at $3396; and finally remained indecisive on Monday below the immediate resistance at $3386, resulting in the formation of a bearish doji in the daily chart, indicating an advent of a selling spree on Tuesday.
Technical Levels to Watch
In the one-hour chart, gold futures are trading at a pivotal point after repeated attempts to cross the 100 DMA, attracting sellers to remain active as the gold futures are trading below the major support at 100 DMA due to the formation of bearish crossovers by the 9 DMA and 20 DMA which have pierced the 50 DMA, and the 9 DMA has even pierced the 100 DMA.
Undoubtedly, if the gold futures continue to trade below the 9 DMA for a few hours, the next target will be the 200 DMA at $3283, and if the gold futures pierce this significant support, bears could turn more aggressive.
Inversely, any attempt by the gold futures to sustain above the 50 DMA at $3358 will provide a good opportunity for gold bears to target $3384.
In the daily chart, the formation of a bearish hammer in the follow-up of yesterday’s bearish doji indicates the continuity of the selling spree if the gold futures don’t hold the immediate support at $3297 on Tuesday.
I anticipate that a breakdown below this significant support could push the gold futures to test the next significant support at the 50 DMA at $3224 this week, and a breakdown below this support could push the gold futures to test the next support at $3119, from where some reversal can be seen.
Undoubtedly, any delay by the US President to come up with some more positive steps to lessen the tariff trade war fear could trigger indecisive moves in precious metals once again.
In the weekly chart, this week’s bearish candle could get confirmation if find a breakdown below the immediate support at 9 DMA at $3271 this week.
Disclaimer: Readers are advised to take any position in gold at their own risk as this analysis is based only on the observations.