On Tuesday, July 15th, our analysis highlighted the critical level at 4046. The recommendation was to consider a short position if the price rebounded in the afternoon but failed to surpass 4046, as this level represented former support that had turned into resistance after being broken. The price did rebound to 4033 during the European session before pulling back to a low around 4013.
The evening's CPI data release came in significantly below expectations, easing short-term inflation concerns and reducing expectations for further Federal Reserve rate hikes. This triggered a sharp, explosive rally in gold prices, which surged to briefly exceed the $4100 mark. However, the price failed to hold above this key level, retracing over 50 dollars by the early morning hours.
What does this indicate? It signals that the market is entering a phase of equilibrium between bullish and bearish forces, with neither side gaining clear dominance. Below $4000, strong buying interest from bullish investors emerges, with buyers stepping in on each dip. However, once the price moves above $4100, these same buyers quickly take profits, while bearish sellers seize the opportunity to enter the market. This dynamic creates the current trading environment: bulls have a narrative to support their view, while bears have their own reasons to hold their ground, with neither side conceding.
In such a scenario, the prudent approach is to wait. Wait for the battle between bulls and bears to reach a conclusion, and then follow the side that emerges victorious. Trading in the direction of the prevailing momentum at that point offers the path of least resistance and a higher probability of success.
Yesterday's U.S. session saw a significant surge, but the subsequent retracement in the late-night/early morning hours was also substantial. The outlook for the Asian and European sessions today leans towards a continuation of the downward momentum. Key attention should be paid to the initial decline point around 4062/66. This zone is crucial for maintaining a bearish bias; a truly weak market will not allow a rebound to break above this level of origin.
Support below lies at 4013. A bounce is anticipated from this area. A strategy would be to consider a long position upon a retest and confirmed stabilization above 4013. However, a decisive break below 4013 would signal further declines.
Today's Trading Plan
Consider selling below 4062, with a stop-loss above 4066, targeting a 30-40 point profit. If the price breaks below 4013 and then rebounds to around 4030, a short position could be initiated with a stop-loss at 4040, aiming for 20-30 points. Alternatively, if the price retraces to 4013, finds support, and stabilizes, a short-term long position could be considered with a tight stop-loss below 4010, targeting 20-30 points.
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