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Gold tested yesterday the upper limit of its medium term bullish channel, but traders took some profits due to bad news at the end of the week with the related speech of the President of the Federal Reserve. After that it declined yesterday and approached the intermediate support of its medium term bullish channel at 1,649 suggesting a rebound. However, a break of these levels will release a large potential and will enable to reach the lower limit of its channel at 1,580.
Technical indicators provide sell signal and evolve in overbuy zone supporting the hypothesis of a decline. Until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in a short term.
As gold tests its intermediate support, we recommend 2 scenarios: the first one is the hypothesis of a rebound where we suggest a buy on the level of 1,649 with the 1st objective at 1,660 and then at 1,665. A breakthrough of 1,646 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means selling of the spot rate as soon as it is broken through its support of 1,649 with the 1st objective at 1,638 and then at 1,635. A breakthrough of 1,652 will invalidate this scenario.
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