The overnight session movements were a surprise to many participants as some fresh money entered markets, ahead of the upcoming Central Bank rate decisions and amid historical conflicts between Israel and Iran.
The two nations in the Middle East had been fighting their own proxy wars since October 7, 2023, but really started clashing directly last Thursday. For a reminder, Israel attacked Iran’s Nuclear plants and engineers as they were only a few days away from creating an Atomic Bomb.
Markets have reacted the same way as in August 2024, where a swift risk-off move had been followed by a major recovery in stock indices. These are the factors allowing markets to rally:
- The war does not create major regional spillovers.
- Iran barks a lot but never does much damage.
- The US and other G7 Nations never really get dragged in.
Index Futures opened the Asia-Morning session on a positive note, and oil rallied a bit before giving back its gains. The overall sentiment has changed, and markets have adapted even quickly from the risk-off tone than in August 2024.
Israel has successfully attacked key Iranian military positions, and Iran’s response has been limited – their Defense and Offense capacities got targeted heavily. Despite more than 700 ballistic missiles being shot and a few unfortunate civilian casualties, damage has been controlled.
Indices all around the globe are up around 0.70% and above, and commodities that got their quotes shaken by war and supply fears have eased.
Markets lose money in risk-off trading, and in the past few years, the moment big players feel the event won’t be dragging its influence for too long, flows quickly turn to risk-on.
Let’s take a look at gold charts as the precious metal retracts from its highs.
Gold Technical Analysis from Daily to Hourly Charts
Gold Daily Chart
Source: TradingView
Gold prices are forming a Twizzer top candlestick pattern on the day and failed to reach the 3,470 to 3,500 Main resistance zone.
The upbeat mood stalled the rally for the precious metal and points towards consolidation as key Moving averages are still lagging on the move.
The Daily MA 20 is, for example, about $60 below at 3,339.
More details of where to look in intra-day charts are below.
Gold 4H Chart
Source: TradingView
Prices are currently trading around the 3,400 Pivot Zone as the RSI is coming back to neutral, allowing for consolidation towards further movements.
The 4H MA 20 is becoming support and holding a further descent. Any rebound from here would be a technical break-retest, although market sentiment would to worsen from here to support gold prices further.
Levels to watch:
Resistance:
- 3,450 Intermediate Resistance and Friday session highs
- 3,420 Immediate Resistance
Neutral:
- 3,400 Pivot Zone and 4H MA 20 confluence
Support:
- 3,380 Support 1
- 3,365 4H MA 50
Gold 1H chart
Source: TradingView
Gold prices rejected a failed break above $3,450 and have since retracted around $60.
The RSI is close to oversold as the selloff accelerated in the past hourly candle, pushed by the MA 20 and 50 turning into resistances.
The selloff is currently stalling at the 3,375 to 3,390 Immediate support in the awaiting further headlines, and it seems like markets will now be turning to the pricing in of Wednesday’s FOMC Meeting.