XULF Report
After the dust has settled fundamentally speaking both equities and gold are in the same scenario as before Bernanke’s comments at the FOMC press conference as the central bank chief refrained from giving any specific schedule for slowing down bond purchases. Instead he alluded to the fact that a wind down will be data dependant. However his upbeat tone on the economy and mentioning that downside risks were diminishing means it is likely the tapering will begin later this year with the September policy meeting being a major focus. Gold dropped sharply from around $1374 to a low of $1339 in the early hours where buy orders accumulated around previous support of $1338 established in May. The sell-off was attributed to panic rather than substance as investors didn’t want to get caught out by a surprise statement by the Fed and Bernanke.
The momentum indicator has finally bounced off its bearish trendline signalling downward motion is building again and if price can test $1338 support again within the next 24 hours it is likely to give way to the bears. The important thing to consider when price retests support levels is whether price has been making lower highs because this manifest that the bears are happy to short the market at decreasingly lower prices. The lower highs actually form a descending triangle which is a powerful and rather reliable pattern. Zoom into shorter timeframes as price draws closer to support and look for lower highs. Price may bounce once or twice around $1338 but the chances of a breakthrough increase with lower highs and shorter intervals between support tests.
There is still a busy schedule ahead today with manufacturing PMI’s from Europe and US and Weekly Jobless Claims and Existing Home Sales to name a few so make sure you have your economic calendar ready to view.
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