Gold has shown very little life since the post-Fed plunge that caught many market participants by surprise. The uninspired bounce thus far smacks of a small corrective move that will at least lead to another leg lower, even it that is only short-lived.
The reason it could be short-lived is because a slope from May 2019 lies not too far below right around 1750. This line may or may not allow gold to hold, so it will be important to see how price action plays out should it get tested. A strong reaction would be encouraging for the upside, while a lack of sponsorship, similar to what we are seeing now, could be indicative of a line of support that won’t hold.
In the former case, where the line of support holds, then the bias could shift higher again as some or all of the sharp move lower is reversed. On the flip-side, should trend support fail the next significant level of support isn’t until around 1675. A big level indeed given its importance since coronavirus gripped markets.
It acted as resistance and support in early 2020 on several occasions, and then as support on two occasions during March. If we don’t get a reaction off the trend-line first, then this would be a spot to look for a sizable bounce to develop from.
Tactically speaking, shorts still hold the upper hand, but risk/reward for new entries isn’t great at this juncture given the relatively short digestion period following the large decline coupled with the short distance to the trend-line. Longs hold no appeal at the moment. Waiting to see how things progress here first before drawing further conclusions.
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
This content was originally published here.
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