Based on the early trade, the direction of the gold market the rest of the session is likely to be determined by trader reaction to the major Fibonacci level at $1296.20.
June Comex Gold futures are trading higher shortly before the regular session opening. The move is being driven by a weaker U.S. Dollar and short-covering ahead of Wednesday’s U.S. Federal Reserve Meeting minutes. A sharp rise in the EUR/USD is also underpinning gold prices.
The main trend is down according to the daily swing chart, however, yesterday’s closing price reversal bottom and today’s subsequent follow-through rally shifted momentum to the upside.
A trade through $1281.20 will negate the reversal bottom and signal a resumption of the downtrend.
The major resistance is the retracement zone at $1296.20 to $1311.40.
The short-term range is $1326.30 to $1281.20. Its retracement zone at $1303.80 to $1309.10 falls inside the main resistance zone.
Based on the early trade, the direction of the gold market the rest of the session is likely to be determined by trader reaction to the major Fibonacci level at $1296.20.
A sustained move over $1296.20 will indicate the buying is getting stronger. If this generates enough upside momentum then look for the rally to extend into the short-term 50% level at $1303.80, the short-term Fibonacci level at $1309.10 and the main 50% level at $1311.40.
A sustained move under $1296.20 will signal the presence of sellers. A move back under yesterday’s high at $1292.70 will indicate the selling is getting stronger. If this could lead to a retest of the main bottom at $1281.20.
This is a potential trigger point for an acceleration to the downside with $1247.20 the next major target.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.