XULF Report
Optimism is still very high across equities driven by a weakening yen and an upbeat earnings season which is preventing gold from claiming back its losses from last Friday. German, French and overall Eurozone GDP numbers are out in the afternoon that could force gold to re-test support at $1420 and $1423 if the EUR/USD pair weakens on worse than expected data.
Since last Friday’s drop the charts are showing how the bulls are defending their line at $1420/23 against the bears attack as they close in on enemy lines trying to break down the $1420 wall. This is illustrated by the substantial lower highs and the higher lows establishing in rather small increments, if any, which shows the selling pressure is building. A descending triangle can actually be drawn with the lower highs and support levels. Price activity has been accumulating just a few dollars higher than support for a few hours now which indicates shorts are building positions. Another test of this support level is likely to result in a collapse and the short target level is $1405 where it is likely to find some support again. Wait for some downward momentum or a strong bearish candlestick before shorting and add to the position once $1420 support is broken. Place stop losses above the lower highs shown on this 1 hour chart at either $1439 or $1445 as a rally past these will signal more range bound trading.
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