10 October, 2016
Commodities have faced one of the worst weeks in 2016 especially gold prices as we have seen the yellow metal falling to fresh four month low on speculation that the case for an interest rate hike by the end of this year has strengthened.
The Dollar index rallied to two month high putting more pressure on safe haven assets. In this report, we review the technical outlook of the major metal commodities and metals ahead of next week trading.
The Yellow metal plunged during last week after breaking below 1300 psychological support, which cleared the path for a re-test of 1250 weekly support.
Prices ended the week on a very negative note as shown in the weekly candle close. And by now, another extension lower is likely in the coming days as the near-term trend turned bearish.
Looking at the wave sequence, gold has a potential target around $1210 per ounce, however a move back towards 1276/1285 resistance zone cannot be ruled in the beginning of next week especially if the U.S Dollar begin to correct some its latest advance.Meanwhile, we don’t expect prices to break above the mentioned above barrier as the upside potential remain limited for the time being.
Prices have found a major top for this year at 1375 level and should retrace at least 50% of the entire recovery seen from 1045 low, which can send prices to the 1210 area highlighted previously.
In the near-term, 1242 level represent a strong support followed by 1232 level. In the opposite, prices should remain under pressure as far as 1276 peak is in place.
Silver is following the same structure as Gold, however we can see that the grey metal is weaker than the yellow metal as prices have already reached the 50% retracement of 2016 low which stands at $13.65 level. The weekly close was very significant as prices showed a strong bearish engulfing candle, reinforcing the negative outlook in the short-term.
In addition, Silver broke below its 20 weekly simple moving average and is now heading towards its 50 moving average which coincide with the 61.8% of the recovery mentioned above, this level is located at $16.55 per ounce and can provide a strong support to prices in order to stop the current sell-off.
In the opposite, any bounce should be limited below 18.00 barrier which turned as a bearish pivot in the hourly chart.
Oil prices turned bullish in the hourly chart as the recent OPEC deal helped prices to start a new impulsive wave in the direction of $51 weekly resistance.
Looking at the technical picture, Oil is showing an inverted head and shoulders reversal pattern in the weekly chart with the neckline located at 51.70 area. Therefore, we expect prices to find strong resistance in the coming days as bears may try to protect this major resistance.
In the meantime, the expected corrective move to the downside should find buyers around 48.70/48.20 area if prices manage to get there.
To conclude, Oil prices remain bullish in the short-term, however the med-term trend still negative below 51.90 peak and only a weekly close above this level should confirm that prices have found a major bottom for this year and the inverted head and shoulders pattern will be ready to open the path for a major rally in Oil prices.
The U.S Dollar traded strongly higher during last week across the board, boosted by expectations for rate increase in 2016.
The Greenback managed to overtake 96.25 hourly resistance, which triggered a strong rally that found a top around 97.20 as the Non-Farm payrolls came out softer than expected.
For the time being, prices are targeting 97.60 peak, therefore any downside wave should be considered as corrective only and we should new buyers around 96.25/96.00 zone during the week ahead as the former resistance levels are likely to turn into supports in the coming days.
This scenario of strength in USD should weigh on commodities which reinforces the views given above.
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