Gold See-Sawing Between Gains and Losses

February Gold finished higher today after see-sawing between gains and losses most of the session. The direction of the U.S. Dollar continues to exert an influence on the movement in gold. Hedge buying in anticipation of a break in the stock market is also helping to underpin the market.

Technically, gold is in a downtrend; however, after holding support at $1234.61, the market is in a position to challenge the main top at $1267.50. A breakout over this price will turn the main trend to up and should trigger a rally into the retracement zone at $1271.85 to $1293.20.

 

February crude oil is trading higher and trying to establish a support base. Technical factors rather than the fundamentals are helping to provide the support. The market is oversold and approaching a pair of bottoms at $90.27 and $90.05.

Holding the support could trigger a short-covering rally, but the move is not likely to last because of high supply. On Wednesday, the Energy Information Administration will present this week’s latest inventory figures. A bearish number could negate the support base and trigger the start of a break into $85.00.

The Euro traded lower against the dollar despite a report that showed the Euro Zone’s industrial production in November surged at the fastest pace in three-and-a half years. The report showed a rise of 1.8% from October and a 3% rise from a year earlier.

Technically, the EUR/USD is nearing a key retracement area at 1.3720 to 1.3761. Since the main trend is down, short-sellers are likely to stop the rally inside this zone.

The British Pound posted a strong gain against the dollar. The Sterling surged after the U.K.’s annual rate of inflation in December dropped to 2%, the Bank of England target.

Traders continued to defend the GBP/USD against a change in trend to down on the daily chart. A break through 1.6337 will change the main trend to down. Look for this Forex pair to have a downside bias as long as the 1.6516 swing top holds as resistance. The daily chart indicates there is plenty of room to the downside. A sustained move through 1.6337 should trigger a break into the main 50% level at 1.6227.