Gold expected to remain soft as near-term risks point to downside
Gold has taken on a bearish bias again in the short-term after failure to sustain an upside move above the key psychological level at 1300. Prices attempted a recovery off the 1260 area but this move proved to be a correction of the September to October downtrend that is in progress since the more than the one-year peak at 1357.47.
Near-term risk is clearly tilted to the downside with trend and momentum signals supporting this view. On the 4-hour chart, there was a bearish crossover of the 20 and 50-period moving averages, while the RSI indicator has fallen below 50.
Softness in the market is expected in the near term with high odds for a dip towards the 1270 level before the 1260.59 low. A deeper extension lower cannot be ruled out as long as the market remains below the 50% Fibonacci retracement level (1308.78) of the down leg from 1357.47 to 1260.59.
Only a rise back above 1300 would suggest that downside pressure has weakened. Clearing resistance at 1320 (61.8% Fibonacci) would indicate the bearish phase has ended.
EUR/USD continues to trade in a range; longer-term trend still up
EUR/USD maintains a neutral bias in the short term as it continues to consolidate below the 50-day moving average. The longer-term uptrend stalled at 1.2091 in early September and since then there was a pullback that took the pair below the key 1.1900 level.
The RSI and MACD indicators are neutral but the market is expected to remain soft with the possibility of a move lower in the near-term to target 1.1660, where the 100-day MA is currently located. Further declines would target support at 1.1470 and 1.1290 ahead of the key 1.1100 level.
Rising back above resistance at the 50-day MA at 1.1846 could see prices move up to the 1.1900 level, which if broken, would increase the odds for another extension towards the 1.2091 peak. From here, there would be a resumption of the uptrend from April, with scope to rise to the 1.25 area.
In the near-term, EURUSD is expected to remain in a range as the market continues to be capped by the 50-day MA. But looking at the bigger picture on the daily chart, the broader trend is still up and there are no signals of a reversal yet. The pullback from multi-year highs is likely a corrective move after upside momentum weakened.
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