Gold drops below 50-DMA, tests 23.6% Fib support
Gold prices fell below the 50-DMA level of $1249.45 and extended losses to $1246 (23.6% Fib R of $1204.70-$1258.79) as the political relief in Washington strengthened the US dollar.
Bearish reversal confirmed
Bearish price action following Monday’s Doji candle indicates that the rally from the July 10 low of $1204.70 has topped out. The yellow metal is trading under pressure this Wednesday morning on signs of USD strength and amid caution ahead of the Fed decision. The easing of political uncertainty helped the dollar index recover from the low of 93.64 in the overnight trade.
Focus on Fed rate decision
Kathy Lien from BK Asset Management writes, “With US stocks climbing to fresh record highs, there’s very little reason for the Fed to change its tune. The positives will probably outweigh the negatives, causing the dollar to extend higher post FOMC but the gains won’t last as investors still question the firmness of US data”. Gold could extend losses if the dollar does strengthen post Fed decision.
Gold Technical Levels
A break below $1246.02 (23.6% Fib R of $1204.70-$1258.79) would open up downside towards $1239.97 (June 29 low) and $1236.37 (June 26 low). On the higher side, breach of hurdle at $1249.45 (50-DMA) would open doors for $1254.88 (June 28 high) and $1258.79 (July 24 high).
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
