GOLD (futures): While the commodity’s current weakness through its key support levels has reinforced our bearish outlook, caution should be exercised following that decline. This is premised on the back of a rejection candle (bottom reversal signal) printed at the end of Friday trading session (clearly seen on daily chart). Gold’s failure at the 1,125 level, its Feb 03’10 high and its subsequent declines through its swing low at 1,074.55, its Dec 22’09 low and longer term rising trendline at 1,070.06 has put it in a short term downtrend and increased further downside risk towards the 1,030.85/1,026.55 levels, its Mar’08 high/Oct 28’09 low in the days and weeks ahead. We envisage those levels should provide support on initial test and turn the commodity higher on a corrective recovery. However, below that level will put the next downside objective at the 986.67 level, its Oct’09 low and possibly lower. Its weekly RSI and stochastics are bearish and pointing lower suggesting further downside. On the other hand, if its reversal candle formed on Friday triggers further upside recovery, we may see Gold pushing higher towards the 1,074.55/1,070.06 levels where its Dec 22’09 low/longer term rising trendline are located. A combination of these levels should put the commodity under pressure and turn it lower again. Further out, resistance levels are sited at the 1,125 level, its Feb 03’10 high and its Jan 20’10 high at 1,148.48. On the whole, although Gold retains its short term bearishness having taken out its strong supports at the 1,074.55/1,070.06 levels the past week, corrective recovery may be shaping up.

Mohammed Isah
Market Analyst
www.fxtechstrategy.com

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