Technical analysis of XAUUSD
Gold has consolidated so far this week around the crucial psychological area of $1,800. Most shares started the week with a new bull run as the Chinese government announced more stimulus. This morning’s data from China were also unusually positive and boosted positive sentiment generally, with annual imports growing 2.7%, trouncing the expectation for a decline of about 10-12%. Chinese annual exports also grew half a percent while the consensus had been a drop of 1.5%. This technical analysis of XAUUSD looks at areas on the four-hour chart.
High resistance on this chart is the latest high around $1,817. This area could be tested again soon. Low support is unclear, though: $1,700 is possible but this area will probably not be reached in the near future, so supports based on moving averages are likely to be more important.
Technical indicators on XAUUSD H4
Moving averages continue to give a strong buy signal, with each of the 50, 100 and 200 SMAs successively above each other and below price. The 100 SMA has extended the distance from the 200. In the short-term, both the 50 and 100 SMAs are likely to be important supports capping retracements. Looking further ahead, the value area between the 100 and 200 SMAs could be the target of any fairly deep retracement.
Bollinger Bands (50, 0, 2) have expanded over the last few days, suggesting that volatility might continue to increase somewhat this week. There’s currently no sign of overbought from Bands or the slow stochastic (15, 5, 5); the latter at about 39 is close to neutral. Volume for this CFD remains fairly high, with the selling column yesterday afternoon GMT suggesting demand for short-term selling into brief pullbacks.
Price action and Fibonacci
Recent price action is generally consistent with what would usually be expected around a key area. Most candles since $1,800 was first passed have been fairly small and several have featured fairly long wicks and tails. This reflects hesitation among traders and possibly a reluctance to commit before this afternoon’s data. The downward engulfing candle from noon GMT on Friday can probably be ignored in the context.
The Fibonacci fan here is based on the daily charts and specifically recovery from post-panic lows to $1,758 in the middle of May. The 38.2% area will probably be an important resistance if price breaks up to a new high, while the 50% could be a focus of support in the value area between the 100 and 200 SMAs.
Futures on gold
Annual futures on gold reflect a basically normal situation of fairly small contango. The difference between August 2020 and August 2021 is about 3% at the time of writing. This suggests that markets are pricing in ongoing moderate gains for gold over the next few months and eventually a new high. Volume is generally low, though, so more than usual this signal should not be relied upon in isolation.
Key fundamental events
While stock markets and the American government’s anti-China rhetoric remain in focus, data today could be key for gold. This afternoon at 12.30 GMT the USA releases annual and monthly figures on inflation and core inflation. A surprise in these could provoke movements on the chart of XAUUSD. Traders will also probably monitor American retail sales closely; this release is at the same time on Thursday.
Technical analysis of XAUUSD: summary
The technical picture for gold is quite positive and suggests that another attempt to reach a new high is possible within the next few weeks. That said, buying into strength is generally not popular, so most medium- to long-term traders might wait for a relatively deep retracement in an attempt to reduce risk and potentially increase reward.
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