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CPI data Hot Hot Hot!

Commentaries & Views

Gold found resistance at that all-important $1,850 yesterday intraday, which the bears pounced on to drive prices lower, likely in anticipation of this morning’s CPI print. That extinguished the scenario for a move to $1,885 quickly.

However, as I type: gold hit what is looking like will be the intraday low at $1,825 this morning on the hot CPI number. Seasoned traders will consider that the initial knee-jerk reaction, on a catalyst, out of a consolidation pattern is likely a false move, which will reverse in the other direction.

We had presented the below 2-hour gold chart earlier this week to show the coil gold was forming. This was suggesting today’s data would be the catalyst for a breakout; that has occurred to the downside. Note the reversal candle in progress: Bulls will want gold to close the day back inside the consolidation zone for another chance at a move higher.

A failure to get back over $1,850 by early next week may signal that the metals will continue to be pressured in the short term.

The USD index continues to move up within the defined daily trend we have been highlighting as well, having found a confluence of support at both the bottom of the upward channel and its 50-day moving average, which we cautioned as a probability.

However, the dollar still faces major overhead resistance in the 104/05 area. Is today’s blowout CPI a marker for the beginnings of a longer-term top in the world’s reserve currency? Traders should continue to expect to be extra nimble in the choppy market we are currently faced with.

Thanks and have a great weekend.

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