Technical Analyst, Saxo Bank
Summary: A correction has been looming for a couple of weeks now in metals. Now it has started with Copper leading the selling pressure with Gold to follow. Silver still holding on - for now
Today's Saxo Market Call podcast.
Today's Market Quick Take from the Saxo Strategy Team
Gold XAUUSD formed a Bearish Engulfing top and reversal pattern a couple of days ago warning of a likely correction. Divergence on RSI supports this likely scenario.
Now the correction seems to be unfolding. Gold is set for a correction down to support at around 1,865 and the 0.382 retracement. However, selling pressure could intensify if Gold closes below 1,865 and a dip down to 0.618 retracement and strong support at around 1,808 could be seen.
For Gold to resume uptrend and cancel the bearish picture a close above 1,949 is needed. IT will pave the way for a move above 2K.
Medium-term. If Gold closes the week at current or lower levels the weekly chart will have formed an Evening Doji top and reversal pattern with a likely move down to around 1,808. 55 weekly SMA will offer some support.
Silver XAGUSD. Bears finally seem to be taking control after the precious metal traded sideways out of its rising channel to trade in a wide range between 24.50 and 23.10. If Silver closes below 23 and below 55 daily SMA selling pressure is likely to increase pushing Silver down to support and 0.382 retracement around 22.04.
If closing below 22 further selling could push Silver down to the 200 daily SMA.
For Silver to resume uptrend a close above 24.50 is needed. If that plays out no resistance until around 25.85
Medium term Silver has fallen short of the strong resistance at around 25.85 but almost reached its potential target of the inverted Shoulder-Head-Shoulder pattern just below 25.
A correction down to test the SHS neckline and the 55 weekly SMA seems plausible. .
Copper. Uptrend has been showing weakness for a couple of weeks now drawing the picture of a correction picture. Support at 410. A close below is likely to further fuel a sell-off down to 0.618 retracement at 395. A dip down to test the lower rising trendline is not unlikely.
Medium-term Copper reached the 0.618 retracement of the Q2-Q3 2022 downtrend around 431. If the ongoing correction push Copper to close a week below its 55 weekly SMA selling pressure could remain for a bit longer before buyers come back in.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.