Gold has gained 1.7% since opening on Monday, reaching a 2-month high of 1117.56 in early European trading on Tuesday. The trend for today is bullish – on the hourly chart many technical indicators are bullish. Tenkan and kijun lines are positively aligned and the Ichimoku cloud is rising. But caution must be taken as the market is in overbought conditions, as the RSI and stochastic are in overbought territory.
On the daily chart, prices are approaching a critical level – the 50% Fibonacci retracement level of the downleg from 1191 to 1046 (October to December 2015 decline). This level at 1118.73 also lies at the top of the Ichimoku cloud. A daily close above the cloud would push prices higher.
But a fall below the key 1100 level could weaken the correctional bullish bias and we could see another downleg and return to the main bearish trend.
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