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Technical Analysis of Gold

After several sessions with no remarkable action in the markets, Wednesday’s fundamentals across the world triggered a heavy sell off across the board. Gold posted its biggest drop in over two and a half months falling from 1.790 to 1.687, after Federal Reserve Chairman painted an improved picture of the situation in the US, dampening expectations for further monetary stimulus that pushed the US Dollar up against all major currencies. On the top of that the upbeat US economic data released yesterday dulled further safe haven demand for the yellow metal. The downward movement found support around the 1690 area, at the 89 SMA on the daily chart. This morning the precious metal is trading up again at 1.720, the 50% Fibonacci level from August’s high to December’s low. Despite yesterday’s drop, the 20 EMA continues to hold above the 50 EMA following the crossover on 25th January. With the US Dollar remaining in a downward channel and the euro gaining back some ground against the greenback, gold could climb back up to 1.762, the 61.8% Fibonacci level. In the alternative scenario, a drop below major support at 1.685 could open the door for 1.628, the 23.6% Fibonacci level.

Dafni Serdari
Market Analyst
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