Gold has retraced to $1100/oz following yesterday’s break above as investors snap up the Dollar in reaction to overbought conditions and disappointing econ data points from both Britain and the EU. Meanwhile, the S&P futures are staring at their own psychological 1100 level along with previous 2009 highs. Therefore, today’s consolidation appears healthy thus far as investors take a breather in anticipation of tonight’s wave of econ data from China. China will release Industrial Production, CPI, CPI, and Fixed Asset Investments. Investors will likely be paying particularly close attention to China’s econ data since the nation’s economy has been an engine in the global recovery. An outperformance in China’s data could give the risk trades a nice boost, whereas a cool down could result in further Dollar strength. Therefore, strong econ data out of China could help gold separate itself from $1100/oz despite today’s retracement. On the other hand, disappointing China data could lead investors to close out some risk trades as well as take profits in gold.
Technically speaking, we’re still unable to place any sort of reliable downtrend line on gold due to a lack of historical perspective. Therefore, gold’s key barrier to further topside gains appears to rest in the hands of the psychological $1100/oz level. As for the downside, gold several uptrend lines serving as technical cushions along with 11/06 lows. Meanwhile, investors should keep an eye on the EUR/USD’s battle with 1.50. Gold has been strongly correlated with the EUR/USD. Therefore, any significant breakout in the currency pair could help drive gold higher.
Present Price: $1101.85/oz
Resistances: $1105.32/oz, $1108.20/oz, $1110.59/oz
Supports: $1100.97/oz, $1097.65/oz, $1094.78/oz, $1091.43/oz, $1087.59/oz
Psychological: $1100/oz, $1075/oz.
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