Necking of Inverted Head and Shoulders Pattern Has Been Breached
Over the last 24 hours or so, a technical pattern has emerged in the price of gold. The inverted head an shoulders pattern made both its right and left shoulder near support at $1338 that was outlined in yesterday’s technical article.
The neckline for the pattern currently falls around $1342 and should remain supported for the pattern to complete.
Measured move targets for the pattern fall at $1352.
The Dollar is Rallying in Early Trading
The US Dollar is gaining in the first half of European trading, but Gold seems to be holding higher despite the stronger greenback.
A speech from ECB President Mario Draghi triggered the upside momentum for the dollar after he reaffirmed that the central bank will ease if necessary.
The ECB announced new easing measures at their June meeting, but the markets bought euro’s following it. This was largely due to an expectation that the ECB would take a more dovish stance, following suit all the other major central banks that have made a dovish shift.
The speech did not particularly seem to send a strong signal that the Bank is willing to act. It mostly discussed inflation levels and the struggle to gain upward traction.
There was no discussion of a rate hike, which the ECB pushed forward into early 2020 at their last meeting. It was previously expected to raise rates over the summer.
Gold has been rallying against the euro on the back of this news today and has broken to a fresh 26 month high. The yellow metal is on track to post a fifth consecutive weekly gain against the single currency.
The pattern described suggests some further upside. The measured move target of $1352 is in line with upside resistance levels. In fact, it is likely there will be some sellers there, especially ahead of tomorrow’s Fed meeting.