Gold bulls need to thank ECB President Mario Draghi and a break of a USD/JPY technical support level for the rally last night that reached a high of $1423.90. The ECB President stated further monetary easing was not at the forefront of policymakers’ minds which lifted the Euro and caused broad scale selling of the dollar. Technical USD/JPY support at 98.85 gave way to dollar bears helping to build strong downward momentum and consequentially pushing gold higher firmly back above $1400. Be aware the dollar decline may be a correction and considering the Fed is ready to taper stimulus and Japan are in the beginning phases of a new stimulus programme USD/JPY could recover rather quickly and hold back gold from making its overdue technical correction.
If price can move a couple dollars lower and complete the neckline at $1411.20 of a double top shown here on the 1 hour chart the short term is bearish and a feasible target is $1406 which is the 61.8% fib retracement level. Place a stop loss above the lower high at $1418 as a violation of this level will indicate more upward movement. Only look to short if this neckline is completed however the parabolic indicator is signalling a sell meaning it is probably the neckline will be achieved.
In an attempt of trying to assess where gold will move over the long term the weekly chart is providing some good information. The momentum indicator is currently at a critical point as it intersects with its bearish trendline. If we see a trendline break on this indicator it will be good for gold bulls as we should see a sustained correction. If this does occur long term position traders should target $1488 as a target level that could be possibly achieved in the next few weeks.
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