Gold Looks to US Home Sales Data to Inform Fed Policy Outlook

Talking Points:

• Gold May Rise on US Home Sales Data But Breakout Unlikely
• Crude Oil May Decline Further as Inventory Gains Accelerate
• Natural Gas Prices Rejected at 3-Month Trend Line Resistance

Gold may struggle to find a potent-enough catalyst to engineer a significant breakout in the day ahead. Prices continue to trade inversely of the 2-year US Treasury yield, suggesting Federal Reserve policy expectations remain in the drivers’ seat. A quiet economic calendar seems unlikely to produce a meaningful inflection point on this front.

US Existing Home Sales are expected to rise 3.1 percent in March, marking the largest increase in 10 months. US housing market data releases have underperformed relative to consensus forecasts over recent months, warning that a downside surprise may be in the cards. Such an outcome may weigh against Fed rate hike bets and offer a shallow near-term boost to the yellow metal.

Meanwhile, crude oil prices will look to the weekly inventory report from the Department of Energy for direction cues. Expectations call for acceleration in the pace of stockpile accumulation with a gain of 2.69 billion barrels. That would mark a pickup from the prior week’s 1.29 billion increase, the smallest in nearly four months, and may compound downward pressure on prices following yesterday’s swift decline.

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CRUDE OIL TECHNICAL ANALYSIS – Prices turned lower anew having found resistance below the $65/barrel figure. Near-term support is at 60.25, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis exposing the 38.2% level at 57.37. Alternatively, a move back above the 14.6% Fib at 62.03 targets the April 16 high at 64.91.

Daily Chart - Created Using FXCM Marketscope

NATURAL GAS TECHNICAL ANALYSIS – Prices recoiled downward from trend line resistance capping gains since mid-January. A break below the 38.2% Fibonacci expansion at 2.513 on a daily closing basis exposes the 2.459-71 area (50% level, April 13 low). Alternatively, a move above the 23.6% Fib at 2.580 targets the 14.6% expansion at 2.621.

Daily Chart - Created Using FXCM Marketscope

GOLD TECHNICAL ANALYSIS – Prices may be carving out a bearish Head and Shoulders top chart pattern. Confirmation is required on a daily close below 1185.23, the 23.6% Fibonacci expansion, with the first downside target thereafter coming in the 38.2% level (1161.16). Near-term resistance is at 1224.15, the April 6 high.

Daily Chart - Created Using FXCM Marketscope

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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