FOMC Reaction: Gold and Silver fell to fresh lows on the year after the FOMC announced the end of QE last week. They are at 10-year lows. As we begin the week, these metals are consolidating, Let’s look at the breakout scenarios.
Oversold and Consolidating: After marking a new low on the year around 1161, gold has been consolidating. The RSI is recovering from the oversold area. If price consolidates further into the 11/4 session, the next time it gets to the 1175-1177 area, the RSI is likely going to be above 30, and reflect a non-oversold market.
If price extends above 1180, we might be seeing further consolidation/correction toward 1200, where we should expect sellers.
With the wind of USD-strength on its back, the bearish scenario is more likely. A break below 1161 is likely to initiate another bearish leg. Now, we know that after a strong push by something that was pretty much expected, we should be cautious of some consolidation ahead. A conservative target could be the width of the current consolidation ,around 15. A break below 1161 thus should draw a target around 1145.
Silver is a similar technical set up.
Poised for a Bearish Continuation: After falling to 15.76, silver rebounded to around 16.23 from the new low on the year. It is no longer oversold in the short-term, and looks ready for another bearish attempt to break the 15.76 low. A break below 15.76 opens up a bearish continuation scenario. The width of the consolidation is about 0.50, putting a target for a breakout to around 15.25. A break above 16.24 opens up a bullish correction rally. The USD is still strong, so we should expect sellers in this scenario, especially if the RSI gets to 50.
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