Gold prices appear poised to finish the week stronger as the U.S. dollar was sold as investors interpreted the FOMC message to be dovish. Delayed rate hike expectations are supporting the precious metal rebound off of the four-month low of $1,141.60 with current resistance coming from the Wednesday high of $1,177.
Price action on the four hour gold chart shows that the bearish decline that started from the beginning of the month is tentatively respecting $1,173, which is the 38.2% Fibonacci retracement level. If price does break out above this key level, we could see a clear path towards the $1,182 area. Further upside could target the $1,288 zone.
If bullish momentum remains strong, a bearish reversal might not occur until price forms a bearish Gartley pattern at either the $1,188 level or the $1,205 area. Additional resistance will come from a trendline (shown in red) that started back from the $1,130.40 low made on November 7th, 2014.
If downward momentum returns immediately and we do not see price trade above $1,177, key support will come from the $1,157 zone. Before the summer, price may have a strong selloff that could target the psychological $1,100 handle.
The trade: Buy gold at $1,168, with a stop loss at $1,158 and take profit at $1,188. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading