Gold 4H chart 9:45PM EDT 11/1/2012
Channel: The 4H gold chart shows a market that has been in a declining channel throughout October until it stopped around the 1700 psychological handle. Since then, gold has been consolidating against the channel, and today (11/1) broke above the trendline resistance.
Breakout: The RSI broke above 60, showing that the bearish momentum is no longer persistent as it had been through October. Still price action to the upside is not convincing. In fact it looks like a flag pattern, which if broken to the downside introduces the bearish continuation scenario, with focus on clearing 1700. Below that, gold has the 200-day SMA near 1650 in sight.
Upside targets: If there is further bullish correction against the October bear run here are the progressively more aggressive retracement targets: 38.2% retracement near 1735.60, 50% retracement near 1747.10, and 61.8% retracement at 1758.60. In this scenario, the RSI should start to hold above 40 with focus on 70.
Silver 4H chart 9:55PM EDT 11/1/2012
Same dynamic: Silver is in the same predicament in that it is also anchoring out of a declining channel which defined October price action. The RSI shows a slightly stronger shift in momentum to the upside. Again, if the RSI holds above 40, there is a good chance for further consolidation, with these retracement targets: 38.2% near 33.00, 50% near 33.44, which is also near the 200-SMA in the 4H chart, and 61.8% retracement at 33.90.
A break below 31.50 should open up the 200-day SMA near 30.50 with more room to the downside after that.
NFP: Tomorrow’s US Non-Farm Payroll data can help decide whether we will have further retracement against the October declines in gold and silver. Forexfactory reports a forecast of 123K after a 114K reading in October (for September).
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.