Gold managed to hold above Thursday’s lows and the highly psychological $1100/oz level despite broad-based strength in the Dollar in reaction to the Fed’s surprise decision to raise the discount rate. The Fed’s decision shocked FX markets after the bell, sending investors rushing towards the Dollar after interpreting the Fed’s announcement as a signal that the exit strategy from loose liquidity has begun. Although gold did experience sizable down-bars on the 4-hour, the pullback wasn’t nearly as intense as what occurred in the EUR/USD. Hence, stability in gold could signal an overreaction in the major Dollar pairs. However, should the risk trade continue its freefall gold may be inclined to follow suit due to its usual negative correlation with the Greenback. Regardless, resilience in gold the past 24-48 hours has been interesting and should be watched by investors. Meanwhile, volatility in the FX markets could remain volatile over the near-term considering the extent of this week’s pullback. Trading ranges could be wide until the Dollar settles and a new normal is established. However, it remains to be seen whether this will translate into gold’s activity.
Technically speaking, gold faces multiple downtrend lines along with 2/18 and 2/17 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: $1114.30/oz
Resistances: $1115.98/oz, $1117.72/oz, $1119.70/ oz, $1121.19/oz, $1123.67/oz, $1126.15/oz
Supports: $1114.24/oz, $1112.01/oz, $1110.03/oz, $1108.29/oz, $1106.56/oz, $1103.33/oz
Psychological: $1100/oz, $1125/oz, February highs and lows
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