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Gold Forecast: Markets Retest Bottom of a Rising Wedge

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

On the other hand, if we break back above the uptrend line, then it completely wipes out the rising wedge and it opens the possibility of a bigger move.

  • The gold markets have rallied a bit during the trading session on Friday, as we have seen a little bit of a recovery from the massive selloff on Thursday.
  • It is worth noting that we are reaching the bottom of the rising wedge that I have been paying attention to, and it looks like we are pausing right there.
  • If we do recognize this as resistance, this could give us a bit of a signal.

On the other hand, if we break back above the uptrend line, then it completely wipes out the rising wedge and it opens the possibility of a bigger move. Keep in mind the gold has been grinding away for a while, but it’s probably worth noting just how negative the Thursday session was. However, we did not break down below the last big red candlestick, so I’m going to use the 200-Day EMA as a bit of a proxy for a selling signal. If we get below there, then the market more likely than not will continue to go much lower, perhaps reaching down to the $1700 level.

Liquidity Could Start to Disappear

On the other hand, if we break above the $1800 level, then it’s possible that we could go looking to the $1820 level, which has been significant resistance a couple of times. Break above that level then opens the possibility of gold going to the $1875 level. The market looks as if it is trying to make a bigger decision, and it is worth noting that the $1800 level has been a bit of a magnet for prices in general. We also must worry about the fact that the liquidity could start to disappear, and therefore we could see significant moves. After all, the holiday season can be very illiquid, and therefore we could have outsized moves based on headlines across the wire.

However, it’s also possible that the market does nothing as well, as the same holiday season can keep a lot of people out of the markets, and unless we get some type of catalyst to get moving, we may just simply hang around this general vicinity between now and New Year’s Day. I will be watching this area very closely because we are at a major inflection point and therefore an area where we will have to make decisions eventually.

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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