technical analysis XAU-USD

Technical analysis of XAU-USD

Gold has made quite a strong recovery so far this week as the likely economic impact of the coronavirus outside China has been realised. Click on the image to magnify. The yellow metal has moved upward in the aftermath of the Fed’s emergency cut to its funds rate and declines for various risk-on instruments like indices and individual blue-chip shares.

XAUUSD’s high resistance on the four-hour chart is likely to be last Monday’s high around $1,690, the highest price for eight years. Low support meanwhile seems to be the extent of the retracement last week from this area, about $1,563.

Technical indicators on XAU-USD H4

 

Moving averages continue to give a buy signal, with the 50, 100 and 200 SMAs successively above each other and below price. The first support from MAs is the 50 from Bands in the area of $1,630. Below this, both of the others will probably function as supports if tested.

There is currently no sign of overbought based on Bollinger Bands (50, 0, 2) but the slow stochastic (15, 5, 5) does print an overbought reading at 84. Relying on signals of saturation now though when there is considerable fundamental tension would be a big risk; realistically, it’s not unlikely that overbought conditions could dominate for some time.

Price action and Fibonacci

 

One can clearly observe the challenge faced in the area of $1,650 in the middle of this week. This area could be important as a support moving forward now that price has surpassed it in the current period. On the other hand, failure to close higher today could entrench this resistance; completion of the current period here as well as the daily candle would give a clearer indication of direction tomorrow and next week.

The 61.8% Fibonacci retracement area seems to be the most important in the near term. This coincides fairly closely with the earlier resistance and now possible support at $1,650. Below this, the 50% Fibo just below the 50 SMA from Bands might be an important area.

Technical analysis of XAU-USD: summary

 

TA isn’t of particularly great use given what’s going on in the news now, but gold seems to be on track to make some more gains into next week against the dollar overall. Monitoring the indicators especially for overbought from Bands as well as the stochastic is key. It’s news though – both of the coronavirus and from stock markets and central banks – that’s likely to drive big movements if any next week.

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