The top is 2,688 target zones
If the 50-day line can then be reclaimed and the buyers maintain control, the next higher important target zone should be around the 161.8% extension target of the small ABCD pattern at 2,688. That price range may have additional significance as it coincides with the top line of a downtrend. This trendline shows dynamic resistance to the current bearish correction.
It also shows the top line of the trend channel parallel to the bottom line connecting the November swing low (B). The previous downtrend channel remains on the chart as a guide (blue dot). Note that the past four days have seen resistance near the first upper channel line.
Short-term strength within bearish formations
Gold established a higher swing low of 2,582 on December 19th, although the downtrend channel is larger than the current uptrend and is therefore considered more influential. That in itself is a bullish sign and requires further evidence. Today we have further evidence of demand improvement. However, this is short-term bullish price action and a countertrend uptick within a larger bearish trend channel.
A sustained rally above the upper channel line would indicate an improvement that could challenge the 2,726 swing high (C). This high was the second rejection from resistance, so it will need to be reclaimed before there is a clear sign of a bullish reversal in gold and the possibility of a continuation of the larger bullish trend.
Precautions when falling below 2,622 signals
Short-term support for gold is today's low of 2,622. Notice that the low supports the first upper channel line (blue dot). It is also close to the resistance high of the past two days. When previous resistance becomes support, the probability of a higher continuation increases. Additionally, the weekly chart (not shown) shows support holding near the 20-week moving average. Additionally, this week could end the week at a six-week high for gold. The highest weekly closing price during this period was 2,650 yen.
Check out our news for all today's economic events. economic calendar.
