Gold Technicals – 1,245 ceiling under threat

After breaking 1,200 on Friday Asian session, price recovered in similar spectacular fashion, closing just under 1,235 on the final trading day in June. The recovery is due to the bullish technical rebound of Gold, which allowed price to rally in the face of a strengthening USD brought about by the weakening of US stocks during the same day. To be exact, USD actually strengthened against all the major currencies on a D/D basis, losing out only to Gold and Silver on Friday, highlighting the strong recovery seen in the precious metals. This behavior is not entirely unexpected, as prices had the tendency to go counter-trend on the final day of the week/month as traders tend to close their winning positions to close their books early.

Hourly Chart

Monday morning started predictably, with price pushing higher early towards 1,245 as the residual bullishness from Friday spilled over. However, as it is a technical rebound move last week, it was always going to be unlikely to break any significant resistances. Hence price pushed lower unsurprisingly, forming an Inverted Hammer/Shooting Star reversal candlestick which was furthered extended into a full blown Evening Star when the next candle turned out into a long maribozu. This would naturally open up lower targets around 1,235, 1,200 and 1,180 once more. However price failed to extend the Evening Star bearish pattern, with price barely test the 1,235 support and traded higher immediately towards 1,245. Price is currently testing 1,245 once more, attempting to break the 1,245- 1,255 consolidation zone of 26th Jun. This time round, it is important to note that direction of USD is in the favor of precious metals – US Stock Futures are climbing higher on the back of a extremely bullish Nikkei 225 play. This increase in risk appetite drives USD lower and puts Gold bulls in a prime position to break the consolidation zone even though Stochastic readings suggest that current price is Overbought. Nonetheless, given the strong overall bearish sentiment, confirmation of a 1,245 break should be sought in order to provide more conviction that a move towards 1,255 is even possible.

Weekly Chart

1,255 is also another strong resistance from the perspective of Weekly Chart, as it is the closing level of 20th Jun 2010, the peak of the consolidation zone from 2nd May to 12 Sept 2010. Stochastic readings currently is still pointing lower, and is deeply Oversold. Nonetheless readings is still higher than the recent record low of 10.75, which suggest that price could still head lower some more – however a break of the 1,175 floor of the previous mentioned consolidation zone may be slightly harder to achieve. With price being so extended, a corrective move higher is possible, that being said, past 2 corrective rally post Channel Breakout has very limited success, and as such traders should not expect Gold prices to simply rally all the way up back into the Channel in one quick fashion. Even if price manage to break 1,255, 1,355 and the Descending Channel Bottom stands in the way, and may push back prices lower once more.

More Links:
AUD/USD – Higher on positive China PMI
EUR/USD Technicals – Trading Flat as Bulls/Bears Undecided
Nikkei 225 – Lower despite 1st positive Tankan print since 2011

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