Market sentiment driven by news events often fades quickly, making it difficult to sustain a directional rally. This is why gold prices lost upward momentum after the Monday surge. We previously identified key resistance at 4115 and support at 4080, a range the market failed to break for most of Monday. After the session closed, prices fell below 4080 and extended their decline.
Yesterday, we highlighted that gold prices remained capped below the 4115 resistance level. Our strategy was to use this level as a short bias, anticipating a pullback to fill the gap left by Monday morning's higher open. We planned to consider long positions only after the gap was filled and prices stabilized. Throughout the Asian session yesterday, prices repeatedly bounced off the 4080 support zone but failed to reach the critical 4115 resistance. The subsequent breakdown in the US session was expected. This morning, gold saw a gap-fill decline, reaching a low of 4040. The gap is now fully closed, and the next price reaction will be crucial for determining the intermediate-term trend.
The overnight low in the US session was 4065. Breaking below this level this morning, prices fell to 4040. The next move is critical. If the European session extends the Asian session's decline and breaks below the 4040 low, bearish momentum will likely accelerate, potentially testing 4022 and the 4000 psychological level. Conversely, if the 4040 low holds during the European session, the market will likely return to a range-bound pattern.
For today's trading strategy, with gold currently at 4048, a short-term long position can be considered while holding above 4040, with a stop loss below this low. The target is 4065-75. A short position near 4090 is also a viable plan for a rebound trade.
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