Technical analysis of XAUUSD

Gold has continued its decline today although so far more slowly than over the last few days of trading, reaching a low just above $1,853. Rotation among inflation-defensive assets away from gold and into bitcoin appears to be continuing. The critical event tonight likely to drive very high volatility on this chart is the statement and subsequent press conference of the Federal Open Market Committee. This technical analysis of XAUUSD looks at the daily chart.

High resistance on this chart seems to be the psychological area around $1,900 or possibly about $10 above this. Low support occurs around $1,680, a very strong area but one which is unlikely to be tested in the near future unless the Fed suddenly turns exceptionally hawkish.

Technical indicators on XAUUSD D1

 

Moving averages are still in the process of reconfiguring towards a stronger buy signal, with the price above all three of the 50, 100 and 200 SMAs. The 50 SMA from Bands completed its golden cross of the 200 last week. However, the 100 SMA remains significantly below  around $1,792. Both the 50 and 200 SMAs are in view as important supports over the next few days, with the value area between these possibly limiting any bouts of losses.

There is no indication of saturation from either the slow stochastic or Bollinger Bands. While the latter is close to neutral in terms of overbought and oversold, the former at about 26 is closer to the zone of selling saturation than neutral. Volumes doesn’t give a clear signal at the moment, with the reading about average for the last few months and more-or-less balanced between buying and selling.

Price action and Fibonacci

 

There has been no clear pattern, either traditional or of candlesticks, over the last fortnight. Fairly long tails on some candles might suggest ongoing high demand to buy or at least support for prices above $1,850.

The 23.6% weekly Fibonacci retracement area is the main technical reference from Fibo for now. This zone might withstand testing unless the Fed signals stronger tapering tonight. Below this, the 61.8% zone of the weekly fan is likely to be an important area, having functioned as a trendline from August 2020 to the start of last month.

Technical analysis of XAUUSD: summary

 

Overall the technical picture for gold remains fairly positive. Whether this might continue after the Fed’s meeting depends on how markets interpret the statement and answers to significant questions. Traditionally, one would assume gains for gold in the current environment of sharply rising inflation and the lack of a firm target against this by the FOMC. However, decade highs in US CPI might spur the Fed to start tightening sooner than expected next year.

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