Range play continues, focus on Bollinger bands

Gold’s hourly chart shows a Bollinger band squeeze.
The direction of the range breakout will likely set the tone for the next move in the yellow metal.

Gold’s sideways churn in the range of $1,630 to $1,610 continues for the third day. With the decline in the price volatility, the Bollinger bands have narrowed.

Bollinger bands are volatility indicators placed two standard deviations above and below the price’s 20-day moving average. A low-volatility period often paves the way for a big move on either side.

The focus, therefore, is on the upper and lower bands currently located at $$1,626 and $1,612, respectively. An hourly close above the upper band would imply a range breakout and open the doors to a test of recent highs above $1,640. Alternatively, a range breakdown would expose the support at $1,594.

The latter looks likely as the 4-hour chart relative strength index is reporting a bearish divergence. Also, the dollar index, which tracks the value of the US dollar against majors, is flashing green near99.38, having bounced up from 98.30 on Monday.