And we finally do have a correction of the recent trends on the market. Not that we need this but that is always a good occasion for the trend followers to enter the market with better prices. USD is a bit stronger in the same time affecting the price of the Gold. In the first two days of this week, the correlation of those two instruments was strong. Drop on the EURUSD caused also the decline in the price of Gold.
The reversal on Gold did not come in the random place. It was a very important resistance on the 1258 USD/oz, which worked as a support in May an June and as a resistance in the second part of June. Now it was time to test it as a resistance again. First contact was positive for sellers. The price created a small Head and Shoulder formation. On Tuesday we broke the neckline, which activated the short-term sell signal. The first target was reached very fast. It was the lower line of the channel up formation present on the chart since the 10th of July. Then the price bounced and tested the neckline as a closest resistance. Everything happened in a very close range and that is how we finished the American session, so to be honest with you without any further conclusions.
During the Asian session, traders decided to continue the correction and they definitely broke the up trendline. This creates an opportunity to reach the second target for the current take profit action – 1243 USD/oz (green). This one can stop the downswing, at least for a while. If not, the third target will be area between 38,2% Fibo and the 1235 USD/oz (orange area). Price going any deeper can be a serious problem for the buyers here.
When entering Gold do not forget about the FOMC, which will definitely influence the USD and as long as this precious metal is quoted in this currency we have to be careful here.
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Interested in Gold technicals? Check out the key levels
- R3 1265.48
- R2 1261.69
- R1 1255.69
- PP 1251.90
- S1 1245.90
- S2 1242.11
- S3 1236.11
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