Gold Price Futures (GC) Technical Analysis – Trader Reaction to $1306.50 Will Tell Us if Friday’s Buying Was Real
Gold prices soared on Friday as the U.S. Dollar plunged as investors prepared for this week’s U.S. Federal Reserve report on Wednesday, January 30. The Fed is widely expected to leave rates unchanged. However, this wasn’t the story exerting the most influence on prices. According to a report from The Wall Street Journal, the Fed is expected to discuss bringing an end to its balance sheet reduction program. This would, in effect, loosen Fed policy, which would make the U.S. Dollar a less-attractive investment. A lower dollar would then make dollar-denominated gold a more attractive asset.
On Friday, April Comex gold futures settled at $1304.20, up $18.30 or +1.42%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The uptrend was reaffirmed when buyers took out the last main bottom at $1300.40. The new swing bottom is $1275.30. A trade through this bottom will change the main trend to down.
The minor trend is also up. The minor trend turned up on Friday on a trade through $1292.10.
The major range is $1404.40 to $1182.70. The market is currently trading inside its retracement zone at $1293.60 to $1319.70. Trader reaction to this zone will determine the longer-term direction of the market.
Minor downside targets come in at $1274.50 and $1264.70.
Daily Swing Chart Technical Forecast
Based on Friday’s price action, the direction of the April Comex gold market on Monday is likely to be determined by trader reaction to the former main top at $1306.50.
Bullish Scenario
Overtaking and sustaining a rally over $1306.50 will indicate the presence of buyers. Although this level was taken out on Friday, the market fell back under it, which suggests the rally was fueled by short-covering rather than aggressive buying. Regaining this level on Monday and continuing the rally will indicate that the buying is getting stronger. This could lead to a test of the Fibonacci level at $1319.70. This level is also a potential trigger point for an acceleration into the June 14 main top at $1137.80.
Bearish Scenario
A sustained move under the former top at $1306.50 will signal the presence of sellers. This could trigger a break back to the major 50% level at $1293.60. If the rally is valid then buyers will step in on a test of this level. If the selling pressure increases then look for a possible retest of last week’s low and main bottom at $1281.50.
This article was originally posted on FX Empire
