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Gold Rally Vulnerable Sub $1361- March Opening Range, NFPs in Focus

Gold Rally Vulnerable Sub $1361- March Opening Range, NFPs in Focus

2014-03-03 19:43:00
Michael Boutros, Strategist

Talking Points

  • Gold approaches near-term resistance- Rally vulnerable below $1361
  • March opening range in focus- break to validate near-term bias
  • Major Event Risk on tap this week

Gold Weekly Chart

Forex_Gold_Rally_Vulnerable_Sub_1361-_March_Opening_Range_NFPs_in_Focus_body_GOLD_WEEKLY.png, Gold Rally Vulnerable Sub $1361- March Opening Range, NFPs in Focus

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • Significant resistance at $1357/61- Topside bias at risk below this mark
  • Breach targets resistance objectives at $1381, $1400, $1415/33
  • RSI trigger(s) set- Ongoing divergence suggests long-side is vulnerable here near-term
  • Support at $1320/22, 1300/06- bullish invalidation
  • Break sub-1268/70- bearish
  • Key Events Ahead: Central Bank Rate Decisions from RBA, BoC, BoE & ECB and NFPs on Friday

GoldDaily Chart

Forex_Gold_Rally_Vulnerable_Sub_1361-_March_Opening_Range_NFPs_in_Focus_body_GOLD_DAY.png, Gold Rally Vulnerable Sub $1361- March Opening Range, NFPs in Focus

Notes: Gold is up more than 12% year-to-date and the advance through the $1268/70 threshold last month played out extremely well with the precious metal surpassing all our topside objectives noted in late-January. The focus now shifts to the $1357/61 resistance range which is defined by the 100% extension of the advance off the February 20th swing low, and the October high. Note that operative channel resistance and a longer-dated trendline resistance dating back to the 2012 high also converge on this range over the next few days.

Interestingly over the past six months, the monthly performance in gold has followed that of the first day of trade for that month. Now that’s not to say you can’t have a volatile month like we saw back in October- but still, the tendency remains. We’ll look for the weekly and monthly opening ranges to offer clarity on our medium-term bias heading into March while noting that a break below $1320 will shift our immediate focus lower. Such a scenario looks for more favorable long entries around $1300. The broader bias remains constructive above $1300/06 with only a move sub- $1268/70 suggesting a more meaningful high may be in place.

A breach above the October high at $1361 keeps our topside objectives in focus with resistance targets seen at $1381, $1400 and at $1415. A breach/close above the August high at $1433 puts a double bottom scenario into play eyeing targets at $1487, $1550/60 and ultimately $1664/85. Bottom line: the rally remains vulnerable below $1357/61 with our attention now set on the March opening range as we head into major event risk this week. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Significance

Bearish Invalidation

Daily

$1357/61

100% Ext / Oct High / TL Resistance

Resistance Target 1

Daily

$1375

9/19/2013 Pivot High

Resistance Target 2

Daily

$1381

161.8% Ext

Resistance Target 3

Daily/ Weekly

$1400

161.8% Extension

Resistance Target 4

Daily/ Weekly

$1415/17

38.2% Retracement / Aug Close High

Resistance Target 5

Daily

$1433

August High / (Double Bottom Scenario)

Resistance Target 5

Daily/ Weekly

$1487/93

50% Retrace / May High / 100& 200 WMAs

Resistance Target 5

Daily/ Weekly

$1550/60

61.8% Fib Extension

Resistance Target 5

Daily/ Weekly

$1664/85

78.6% Retrc / 200% Dble Bottom Objective

Support Target 1

Daily

$1336/38

100% Ext / 61.8% Retracement

Support Target 2

Daily

$1320/22

Friday Low / 61.8% Retrace

Bullish Invalidation

Daily

$1300/06

61.8% Ext / 50% Retrace / 200DMA / TL Sup

Key Inflection

Daily / Weekly

$1268/70

61.8% Retrace / 50% Ext / 100DMA

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars Tuesday-Thursday mornings this week on DailyFX Plus (Exclusive of Live Clients) at 1230 GMT (8:30ET)

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