Gold rally could come under pressure
Gold is managing to gain ground this morning, following on from an intraday head and shoulders breakdown yesterday. Given that sharp rally into the 76.4% retracement ($1352) over the past week, there is a strong chance we are going to see the two-month descending channel continue apace. With that in mind, we are looking out for some further weakness come into play to reverse some of the recent gains.
From a wider perspective, we would need to see a break above $1358 to breakout from the channel. However, for now, we are trading within a rising wedge pattern (bearish), which points towards a likely break down. As such, while we may not reach the 76.4% level to get short ($1350), the 70% or 61.8% levels still offer interesting areas.
Conversely, a move back above $1352 would point towards a continuation of this recent rally.