Gold has decreased as much as $1,504 in Friday's trading session, but now is trading in the green after the Federal Reserve decision to add more stimulus measures to fight the coronavirus fallout. The FED has cut the federal funds rate by 100 bps and launching a massive $700 billion QE. The metal opened with a gap up, but it is still premature to talk about a significant upside movement after the breakdown below the $1,555 static support. The USD weakness could send Gold higher again. So, if the USDX decreases, we can expect the yellow metal to jump towards the $1,700 psychological level.
Gold has rebounded, but it has registered only a false breakout above the $1,555 level, it has increased as much as $1,562 after opening the current session. The price has come back down to pressure the inside sliding line (SL) of the descending pitchfork and the S1 ($1,524) level, we'll see what will really happen because the selling pressure remains high as long as it is traded below $1,555 resistance (support turned into resistance).
Only a false breakdown below the inside sliding parallel line (SL) could signal only a temporary drop. If Gold registers another false breakdown, rejection, from the S1 (1524) level and from the sliding line (SL), we could think at a bullish momentum towards the upper median line (UML) of the descending pitchfork.
A further drop will be confirmed if the price closes today's gap and if it closes and stabilizes below the S1 (1524) level and below SL (descending dotted line), the next targets are seen at $1,484 level and lower at the median line (ML) of the descending pitchfork.
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The next major downside target is represented by the $1,484 level, a failure to reach this level could announce a potential upside movement. Gold could jump way higher on the short term if it comes back above the $1,555 level, you should know that a major increase will be confirmed only after a valid breakout above the upper median line (UML).
If the price fails to approach and reach the median line (ML), gold could come back at the upper median line (UML) as soon as possible. The last drop was natural after the impressive upside movement and after the USD rally.
Gold could drop anytime, that's why you should wait for a confirmation before going long again.
The material has been provided by InstaForex Company - www.instaforex.com