(MENAFN- Daily Forex) Gold market sold off rather drastically during the trading session on Thursday, but just as we had seen during the previous session, the market then turned around to show signs of life in order to form a bit of a hammer. At this point, it will be interesting to see whether or not we can take off to the upside, especially as the $1830 level is significant resistance, which is the top of the overall consolidation, and therefore it is likely that we will continue to see this area see a lot of order flow.
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If we can break above the $1830 level, then it is likely that we could go looking towards the $1875 level, which is an area that we have seen a lot of noise previously. That being said, the market is likely to see a lot of pressure at that $1830 level, so I think it is going to be difficult to break above there . If we do, then the market is likely to see a lot of money rushing into the market, and therefore the momentum could pick up quite drastically.
On the other hand, if the market were to break down below the bottom of the candlestick, we could see a break down, although quite frankly I expected one today as we had done exactly that. I think doing that two days in a row would of course be very negative. At that point in time, I would anticipate that the market should probably go looking towards the $1800 level, as we have seen a lot of interest in that area and of course is a certain amount of psychology at play. A move down below that level would of course open up even more selling, perhaps reaching down to the $1785 level which is the bottom of the overall range.
Pay close attention to the US dollar, because it does have a negative correlation, and of course we have the negative correlation between the two, so it does make a certain amount of sense that we would see this play out as per usual. Ultimately, you should also pay close attention to the 10 year yield as well, as a rising yields typically works against gold as well. Either way, I think the one thing that you can probably count on is a lot of noisy behavior so keep your position size relatively small.
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