COMMODITIES: Gold capped at $1238

By Jameel Ahmad
Chief Market Analyst, FXTM
After breaking through a bearish trendline at the beginning of last week, Gold benefited from some USD profit-taking and managed to climb its way back up the charts. However, the yellow metal found resistance at $1238 preventing entry to $1240 and current technicals indicate this could be a psychological ceiling in the current Gold market.
The $1238 level also represents a 50.0 fib level from the previous high ($1344) to the previous low ($1131) and the metal finding resistance at the 50.0 fib level twice last week does suggest the Fibonacci levels are in play. If this is the case, technical traders would likely be bearish below $1238 and looking at a potential entry opportunity if Gold manages to break through this resistance.
The main downside risk for the USD is the FOMC Decision, where any dovish comment on inflation expectations from the Federal Reserve would likely encourage USD profit-taking and inspire bullish moves in Gold back towards $1238. So far, the Federal Reserve has been fairly quiet regarding the decline in oil prices but traders should watch out for any potential dovish comments.
As long as USD demand remains consistent over the next one or two days, support levels for the metal can be found at $1204 and $1197. If the $1197 area breaks, further support can be found around $1190. It would require an unexpected hawkish comment to move Gold any lower than the psychological $1180 level.”
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