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Further short-term weakness for gold but USD/CHF likely to strengthen

I have been a gold bull all year as you know, but recently I pointed out how gold had run into some significant longer-term resistance from the one-year upward-sloping trendline and the blue 100-month moving average that you can see in the chart below. My latest analysis backs up this short-term negative view.

April’s red doji candle formation only helps to reinforce the likelihood of a medium-term top for gold, after we halted at that important resistance level. You can see that the 23.6% Fibonacci resistance is at 1252 and we have failed to close above this level on a monthly basis.
If we zoom in a little to the weekly chart we can see a more sideways pattern as we consolidate those strong gains seen in January and the early part of February.

I say consolidate because this does look like a medium-term sideways pattern which is often seen after a spike higher in any market. I don’t see anything particularly negative that makes me think gold is about to collapse and give up all of this year’s gains. However, I would not be surprised to see gold head lower towards the 100-week moving average at 1195/1194 and perhaps even as far as the support from the downward-sloping two-year trendline at around 1185. I would suggest that within this 10-point area could be an excellent longer-term buying opportunity with a good chance the recovery will resume.
It is worth noting that the 100-day moving average crossed over and above the 200-day moving average at the end of March, which is often a longer-term bullish signal. However, if we look at the short-term four-hour chart, the picture does reinforce that negative view for current trading.

Clearly, the upward trend on the left-hand side of the chart has been reversed and we have been in a short-term negative trend since the second week of March. You can see we have a more negative moving average crossover just at the point where we tested the upper trendline in the downward-sloping channel on Tuesday of this week. This just reinforces the short-term negativity.
It looks likely we will see prices start to move below minor support at 1225 and perhaps target 1215/1214 then the April low so far at 1208. I wouldn’t be surprised to see that level broken and for us to head towards the first major support level at 1195/1194. I will need to see a break and close above 1238 to convince me that the recovery for this year is ready to continue.
The USD/CHF has been heading lower since at least the beginning of February and has lost quite a lot of ground, tumbling from 1.0257 to a low this week at 0.9543. There is good reason to think that we have just witnessed a low for this move and the pair can start to head higher into April.

Firstly we have 100-week moving average support at 9550, which has obviously held perfectly. More importantly, if you look at the daily chart there is a three-and-a-half-month trendline coupled with one-year trendline support that intersects around the 0.9550 area. In addition we have the 61.8% Fibonacci support at 0.9548 and, as if that wasn’t enough, we also have a positively diverging stochastic at the bottom of the daily chart you see below.

My recovery targets for the USD/CHF are 0.9670/0.9680. If we can make it through here we will have beaten a three-week downward-sloping trendline and this should open the door to the next target of 0.9750/0.9760. Eventually we could make it as far as quite strong resistance at 0.9820/0.9830.
Jason Sen
Technical Analyst & Trader
For more information, trading education and offers visit InterTrader Direct
The content of this article is the personal opinion of the author and not InterTrader Direct. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest. Nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.

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