The EUR/USD broke out to the upside after positive PMI data, and gold responded. The precious metal rode past our 3rd tier uptrend and 2nd tier downtrend lines on its way to $950/oz. However, Gold’s rally is pausing after better than expected U. S. Existing Home Sales data caused the Dollar to appreciate. Gold is not quite sure which direction to head in with the Dollar appreciating and the S&P futures setting fresh 2009 highs.

Hence, the precious metal is in a correlative flux. Regardless, today’s movement is certainly positive and shows gold is still in a medium-term uptrend despite recent weakness. That being said, the precious metal must deal with a couple strong technical obstacles to the topside.

First, gold must face August 13th highs and our 3rd tier downtrend line. The significance of August 13th levels seems to be a recurring theme throughout the FX market. Furthermore, gold may still gravitate towards its highly psychological $950/oz area as it has in the past. As for the downside, today’s encouraging upward movement creates several comfortable technical cushions beginning with our 2nd tier downtrend and 3rd tier uptrend lines. Additionally, we should consider $950/oz as much of a cushion as it is a barrier.

A key for gold will be leaving behind the lid of its 7/20-7/28 trading range. If the S&P futures add onto their gains today and the Dollar depreciates, gold could find the energy to extend its upward momentum. On the other hand, a rising S&P and appreciating Dollar may leave gold stuck in a correlative crossroads.

Present Price: $953.20/oz

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