Gold is holding strong well above Friday lows and its highly psychological $1100/oz. However, the precious metal is trading off of Friday highs as the risk trade consolidates across the board. We recognize profit taking in the EUR/USD and Cable. That being said, these two currency pairs still have quite an uphill battle to face on the route to recovery from this year’s surge in the Dollar. Gold is performing well considering the uncertainty in the risk trade and the precious metal’s negative correlation with the Greenback. On the other hand, gold’s resilience could also signal that the risk trade is oversold. Therefore, investors should keep an eye on activity in the major Dollar pairs to determine whether we are witnessing a real bottom in the risk trade or just another bounce. Much of that will depend on upcoming economic data releases and whether there is more unexpected news from the EU’s PIIGS nations. Furthermore economic uncertainty in the EU could lead investors back towards the Dollar and out of gold. Gold broke through some key downtrend lines over the past few trading sessions, meaning momentum is pointing in favor of the topside. However, FX markets have been extremely volatile lately, meaning the tide has the potential to turn quickly.
Technically speaking, gold faces multiple downtrend lines along with 2/17 and 2/19 highs. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 2/18 lows and the highly psychological $1100/oz level should it be tested.
Present Price: $1121.10/oz
Resistances: $1121.19/oz, $1123.67/oz, $1126.15/ oz, $1128.21/oz, $1130.93/oz, $1133.40/oz
Supports: $1117.32/oz, $1115.34/oz, $1113.61/oz, $1111.63/oz, $1107.91/oz, $1105.93/oz
Psychological: $1100/oz, $1125/oz, February highs
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