Gold on Front Foot Ahead of European Trading  – Placing the Sell Limit

Posted Thursday, June 14, 2018 by
Arslan Butt • 2 min read

Recalling our forecast Is It Time to Sell Your Gold? – Fed Rate Hike In Highlights, the precious metal traded exactly inline with our forecast. Gold dipped dramatically to $1,292 on the release of 2% Fed fund rate but reversed as soon as investors realized that this 2% rate hike is already priced in.  

FOMC was mostly hawkish in recognizing that economic activity is growing at a solid rate. Officials stated that the labor market has continued to recover, household spending has picked up, and business fixed investment has continued to rise slowly.

However, the greenback lost the battle when Fed reiterated that their monetary policy stance remains accommodative in order to support the jobs market and sustain the 2% inflation rate. The word accommodative reflects the dovish tone of policy members, which is why the dollar took a bearish turn.

Anyway, today all eyes are focusing on the ECB monetary policy, especially Mario Draghi’s press conference. Refer to FX Leaders June 14- Economic Event’s Outlook for policy forecast and expectations.

Despite the bullishness in gold, it’s struggling to break out of the $1,294 – $1,301 trading range. Looks like the traders are waiting for the ECB policy meeting. As we know, the hawkish remarks from the ECB will strengthen the Euro, whereas the dovish policy will bring sellers.

How ECB’s Decision Links to Gold?

There’s a strong negative correlation between dollar and Euro. It means the stronger dollar makes Euro weaker and vice versa. Whereas, there’s a strong negative correlation between gold and dollar. Thus, a change in greenback will also bring changes in the gold prices and that’s why we need to trade gold today.

Gold - 4 Hour Chart

Gold – 4 Hour Chart

Technically, the violation of $1,294 can lead gold prices towards $1,289 and $1,281. While the bullish breakout can open a room for buying until $1,307 and $1,317 today. I’m placing my sell limit near $1,306 with a stop near $1,309 and open take profit to capture 50/60 pips. Good luck!


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