US MARKET

XAU / USD resistance is ahead of the Fed


Gold Price Talking Points:

  • After a strong escape this summer, Gold price have now spent almost six months digesting.
  • FOMC is on the calendar tomorrow, and the US dollar is in a precarious situation that can see the currency breakout in either direction, as yesterday’s analyst pick pointed out.
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

This summer Price action was emblematic of what can happen central bank– risk-based environment. With the prospect of continued fiat debasement, spurred by stimulus artillery designed to offset the coronavirus pandemic, investors have rushed into non-fiat assets like gold and silver at a record pace.

Overbought conditions populated the gold markets for part of last summer, but that didn’t seem to matter in early August as the yellow metal hit a new all-time high at $ 2,075. But that same day Gold prices put in a bearish engulfing formation, and as warned in this week’s technical forecast, this could open the door to a scenario of removing these overbought conditions over the longer term.

Now, here we are almost six months later, and buyers still have not been able to regain control of gold prices. Instead, we remain in a digestive cycle that so far shows no signs of slowing down. Meanwhile, similar themes of strength to what Gold showed last summer have surfaced in Bitcoin so what Ethereum and, now, in the stock of Gamestop (GME). These bull markets would all seem symptomatic of a very loose monetary environment, and this is something we will hear the Fed talk about tomorrow at its rate decision / press conference.

At this point, gold prices are still digesting, fitting into a longer term symmetrical triangle pattern.

To learn more about symmetrical triangles, check-out DailyFX Education

Gold Price – Daily Chart

Daily Gold Price Table

Graphic prepared by James stanley; Gold on Tradingview

Get a shorter term on the matter and there may be even less clarity. There has been some adherence to the Fibonacci retracement levels set by the major June-August move. The 61.8% marker of this study at 1825.31 has now detected some supportive inflections; while the 50% marker of this move is on top of a resistance zone that is currently helping to maintain highs (represented by a blue box in the graph below).

Gold forecast

Gold forecast

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Four hour gold price chart

Four hour gold price chart

Graphic prepared by James stanley; Gold on Tradingview

Short-term gold price strategy

Given the case of longer term digestion that remains on the chart, there are basically two avenues for traders: either play between the cracks or look for the ‘big break’. Given this week’s economic calendar, as well as the multitude of earnings releases due by US companies, and the potential may exist for gold prices to move into this next trend, one way or the other. ‘other.

The bearish side of the matter could prove particularly difficult after last week’s test below the 1825.31 level. The bottom of this wick shows just above the 1800 grip, leaving about $ 25 of tough ground on the chart under the current price action; but it may keep the door open for potential downside breakout from the 1825.31 level or January low of 1801.47. Underneath is an area of ​​confluence which remains relevant, as it helped catch up with the November low, and it goes from 1763.27 to 1766.28.

On top of the price action there is another large area of ​​relevance which runs from 1900 to 1920, and this could be tracked for an “r2” area if prices were to test beyond the 1859-1873 area. . Beyond that, there is another Fibonacci level around 1943.41, after which the current four-month high kicks in at 1965.55.

Main trading opportunities in 2021

Main trading opportunities in 2021

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Eight Hour Gold Price Chart

Gold price chart for eight hours

Graphic prepared by James stanley; Gold on Tradingview

— Written by James stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX



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