Gold just flew to the moon and back! What a wild roller coaster ride but traders are likely wondering what’s next for the precious metal. More bearish momentum ahead or will the technical area draw in buyers once again?
In the world of trading, imagine the gold market on the 1-hour chart as a high-stakes poker game. Gold bulls just made a bold move after bouncing off a critical broken resistance-turned-support area around the $1930 handle, likely driven by speculation of a possible announcement that the peak in the interest rate hike cycle is not too far ahead.
On that sentiment, the bulls pumped the market towards the $1950 peak resistance area, last seen back in early September. But a table full of sellers, a mix of technical players and USD bulls with “hawkish” monetary policy biases, were waiting for a showdown.
But just like that, Gold quickly retraced to the $1930 support after we finally got the highly anticipated Fed event, who signaled that rates will likely stay higher for longer, and that another rate hike may be in the cards for 2023.
Looking ahead, the $1923 – $1930 range is the poker table for technical buyers, with the 100 simple moving average and past support & resistance levels as their cards.
If you’re long biased as the market still trades above the simple moving average, watch for bullish reversal signals in that area, which may attract more bulls if broad U.S. dollar sentiment weakens or fully reverses back to negative before the end of the week.
On the flip side, after big red candles like we saw today, more bears may be preparing for a bearish hand, especially if gold dips below $1923 – $1930 area of interest.
If the U.S. dollar continues to gains strength, XAUD/USD may break lower and revisit recent lows just above the $1900 major psychological level, a feasible target given the average true range of around $14 per day.
Whatever your directional bias may be, don’t forget to practice solid risk management because this market is getting wilder than a rodeo on roller skates!