Technical Sentiment: Bearish

Key Takeaways

• The U.S. Dollar is slightly bearish – within a small corrective phase – against most counterparts as traders patiently await FOMC Meeting Minutes on Wednesday;
• Precious metals suffered a large sell-off so far during the U.S. trading session;
• Bouncing off $1,220 resistance trendline indicates Gold bears remain in control.

A bullish bounce and two days of consolidation stirred up plenty of bullish scenarios for Gold bugs; however selling pressure built up quickly once the main resistance trendline at $1,220 was tested. With a new Lower High in place, sellers will be looking to re-test the line in the sand at $1,180 and possibly take another shot at breaking it.

Technical Analysis

Halfway through the 8^th October U.S trading session, Gold has erased all gains accumulated earlier in the day. Today’s rally failed to overtake the most recent Lower High at $1,222, reversing instead once the resistance trendline was hit. Consequently, the swing structure indicating a downtrend remains intact for now and more losses are expected, unless the FOMC meeting minutes trigger a deeper sell-off in the US Dollar.

Stochastic confirms today’s top on the 4H chart, indicating a decline from overbought territory immediately after the European session. Before Gold can re-test $1.183, price must first close below $1,203, where we have an intermediary price pivot line, otherwise we might see a prolonged consolidation between this level and the upper resistance trendline.

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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets