XULF Report
Finally gold bulldozed its way through the mighty $1400 resistance yesterday but did have a dip back below after Italy’s borrowing costs increased in a 10 year bond auction. Although the uptrend did resume helped by a slightly downwardly revised US GDP number that weakened the dollar against most major currencies. Japan’s stimulus programme continues to pay dividends evident in Industrial Output that was more than double estimates and this has provided a bit of support for gold in its newly found uptrend.
As I write the market on the 30 minute chart is tinkering on the overbought territory according the RSI so be aware of possible pullbacks. The bulls will have more confidence now the formidable $1400 level has been broken therefore pullbacks present good long opportunities. Any bounce off the bullish trendline illustrated by the red line offers a good low risk entry. If price pulls back and breaks the trendline this would indicate the trend maybe weakening. Fibonacci Retracement levels are very useful for assessing the strength of a trend and when it has come to an end. Often if price retraces and breaks the 61.8% Fib level this indicates the current trend is very weak and the market will probably become range bound. The 61.8% fib level of this trend is at $1397.50 therefore a dip back below this would probably end the bulls hope of a continuing trend and more highs in the short to medium term. We are currently experiencing minor resistance at $1420 which was previous support that was broken on 10th May after a move through this level target levels are $1445 and medium target is $1488 that is the neckline of a potential double bottom on the daily chart. The main data to watch out for today are German Retail Sales at 2pm and US Income and Spending at 8:30pm.
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