Gold continued to recover last week and closed up at around the 1273.64 mark despite the return of sentiment towards the USD. Neither hawkish remarks from Janet Yellen nor improving US employment data managed to significantly hinder the metal as it moved higher during the week. However, the consistent rally could be coming to an end now that the commodity is flirting with becoming overbought. Moving ahead, this week is relatively rich in US data which could see gold ranging within a fairly wide band.
Gold extended on its previous bullishness and made a strong recovery throughout the entirety of last week. The recovery was largely technical in nature as the metal ignored the strengthening greenback and improving US fundamental results. Specifically, stronger than predicted JOLTS Job Openings and Unemployment claims of 5.79M and 264K respectively went basically unnoticed by the commodity.
Looking to the technical analysis, gold’s daily EMA activity has become bullish but the RSI oscillator readings could limit upside potential. Specifically, the daily RSI oscillator is verging on overbought which should help resistance at 1285.64 remain intact. Moreover, RSI readings on the H4 chart are already highly overbought which will be causing selling pressure to mount. Additionally, the ADX oscillator is signalling that much of the metal’s momentum is running out which makes a downturn all the more likely. Furthermore, there is now strong evidence that a corrective ABCD Flat pattern is nearing completion which could really see the metal plunge.
Going ahead, the coming week is relatively rich in USD data which should see gold range between key support and resistance levels. Additionally, the Federal Funds rate decision is due out and, given the recent hawkish Fed tone, could mean that the metal is poised to seek out support prior to making another push higher. However, keep watch on Yellen’s remarks in the wake of the Funds Rate decision as they are likely to generate a significant degree of sentiment trading mid-week.
Ultimately, it is likely to be a volatile week for gold due to the impending US rate announcement but the metal should remain fairly range bound. This being said, the commodity now looks poised to make the move lower as a result of a corrective flat and overbought RSI readings. However, keep watch on the fundamental front as a surprise rate decision could upset any nascent pattern formations significantly.