Gold's rally stalls ahead of key US inflation data
Recent price action on gold appears to be corrective, given the overlapping natures of the swings and choppy trading conditions as it grinds higher. The retracement has stalled around the 38.2% Fibonacci level and weekly R1 pivot point, and a two-bar bearish reversal formed at the resistance zone to suggest the market is trying to top out. That said, corrections always have the potential to push a little higher before momentum truly turns - and we also have a key inflation report which brings the potential for volatile spikes before its next move fully plays out.
- The bias remains bearish 1750 ahead of today's CPI report (with a view to scale in and tighten stops should momentum turn lower).
- The initial bearish target is the weekly pivot point around 1710-13 support zone, a break beneath which brings the 1700 support zone into focus.
Trade closed: target reached:
Our initial target around 1710 and 1700 were met within the hour after US CPI inflation missed expectations. Prices crashed through the bullish trendline with ease and formed a lower high around 1733, and prices are now consolidating around 1700. As traders across Asia are yet to react we see the potential for a secondary reaction lower, but with 1700 being such a round number there’s also chance of a minor bounce before losses resume. The bias remains bearish below 1712 and for a move down to 1691 – a break of which brings the 1680 support zone into focus.
