Gold has been stuck in a tight trading range all week long, as traders are looking to U.S. economic data for direction. Ahead of the NFP report traders seem well positioned to test $1,294.40 and $1,298.56.
Technical Analysis
Currently, the main levels of interest for Gold are the resistance at $1,298.56 and the support at $1,277.53. Both levels have been tested at least twice and were respected perfectly by the market. The resistance is strengthened by the 200-Day Moving Average, consequently the level is extremely important in the case of a breakout but it’s also adds weight if a rejection occurs from this price level downwards.
Price action within the current channel is very tricky. April 3rd low of $1,281.30 can be interpreted as a higher low in the recent trend configuration, pointing out a small weakness that would lead towards $1,298.56; yet price also respects a short term resistance trendline that would suggest a triangle pattern inside the range. As the NFP report comes out and volatility increases, the triangle breakout will offer the first clues, but the range boundaries are the most important levels to be broken. Above $1,300 the main resistance levels are $1,320 and $1.350.
If Gold rejects off the 200-Day SMA yet again then $1,262, the 61.8% Fibonacci retracement between $1,182 – $1,392, will be in play in the coming week.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets