Gold Trading Analysis
Reversal At 61.8% Fibonacci Retrace
- Gold (daily chart shown below) has printed the largest single day decline in over 4 weeks and dropped one percent after the strong U.S. NFP data killed near term expectations of additional financial stimulus from the FED. This has seen the formation of a bearish engulfing candle on the daily timeframe which is signaling potential for near-term gold downside price action.
- Gold (CMX) has seen an increase in net longs from 142,223 on 21st January to 172,359 on the 31st january. It should be noted that this does not reflect the change in sentiment seen on Friday as the report lags and is reflecting positioning on the previous Tuesday.
- Gold has likewise closed slightly down over the week after the NFP fuelled sale of the precious metal eroded any earlier gains.
- Stronger jobs based data is indicating that QE3 may not be needed at this point and this was dollar positive news and therefore Gold negative.
- The drop was 127% of the ADR over 60 days as price dropped from an earlier high of 1763.15 to a 1723.65 close.
- The high at 1723.65 was just below the 61.8% Fibonacci retrace of 1920.75 – 1522.6 as highlighted in our previous gold update. This area has confluence with price structure support and has once again proved to be strong resistance.
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