Gold has reached $1875 levels yesterday, extending its proposed rally above $1855 mark. The yellow metal is now facing a convergence of resistance viz. dropping trend line since $2075 levels and fibonacci 0.618 retracement of the recent drop between $1960 through $1676 respectively.
Ideally, a bearish bounce is expected here and Gold might turn towards its larger trend, which is down. We are proposing an ending diagonal count from $2075 highs, which should ideally terminate below $1046 levels going further.
An ending diagonal is a motive structure, which unfolds into 5 waves with each wave subdividing into 3 waves. The entire drop between $2075 and $1676 was an A-B-C, Wave 1; while subsequent rally has also been an A-B-C, Wave 2 on the daily chart.
If the above proposed structure is correct, Gold is expected to drop below $1676 levels, carving an A-B-C, Wave 3; followed by Wave 4 and 5 respectively. This would drag prices below $1046 lows to complete the proposed expanded flat (A)-(B)-(C).
Alternately, if prices continue higher towards $1960 resistance, it would indicate that the trend might have turned bullish and that Gold might move higher above $2075, going further. Probabilities for the latter count remains less for now.
Gold might be preparing to produce an Evening Star reversal pattern around the current price action $1867 levels. If successful, it would confirm that bears are back in control and are here to stay for long.
Finacademy Technical Team
Gold dropped to $1770 mark on Tuesday before finding some support. The yellow metal is still testing its intermediate trend line support connecting $1721 and $1758 levels respectively.
The US dollar index carves a meaningful top around 96.88 mark over the last week. The index reversed sharply on Friday confirming a bearish Evening Star candlestick pattern on the daily chart.
EURUSD has carved a potential bottom at 1.1186 mark over the last week. EURO bulls have managed to stage a 150 pip rally thereafter, before pulling back.