Gold Technical Update

Previous: Gold in Bullish Breakout from Consolidation; Break above 1764 Opens up 1800 (2/21) 

XAU/USD (Gold)

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The 2/29 Ben Bernanke speech to congress did not mention any plans for QE. The lack of this gave the USD a boost, while giving gold and silver their largest 1-day fall in 2012. The daily chart shows that the market was trading near, but under the 1802 resistance pivot, of what appears to be a range-bound market. The concept in a range-bound market is that the further away from the middle, the more likely it will want to return back to this middle or central equlibrium. For gold, it is probably around 1660-1665. Then, if bearish momentum persists in the short-term, we may test the 1550-1560 range lows.

Trade plan: However, from a trading perspective, there may be too much risk of rebound back toward 1800, especially when the RSI reading in the daily is held above 40. In fact, a bullish continuation at this point is just as likely, if not for Bernanke's lack of QE mention to give USD a short-term boost. A break back above 1802, should open up market to record high from 2011, near 1920.

Sticking with the short-term bearish outlook for now, a good price to sell might be closer to 1760, as the 1H RSI closes in on 60. An entry from here, with the aggressive target to 1560 and a stop at 1820, gives a 200:60 reward to risk, or slightly better than 3:1.

The 4H chart closes in on the action and sees that 1750 is 61.8% retracement of the 1790-1687.12 dip. This is where the R/R to short the pair starts to be acceptable in my opinion, though there is always the chance we get a shorter corrective rally before another leg down ensues. A final note on the 4H RSI: It should remain below 60. A break above which invalidates the bearish outlook and suggests retesting of the 1800-1802 highs.

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Fan Yang CMT is a forex trader, analyst, educator and main contributor 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.