technical analysis XAUUSD

Technical analysis of XAUUSD

Gold steadied near two-week highs this morning as participants remain focussed on fresh fiscal stimulus in the USA that might drive higher inflation. The Democrats’ plans include raising the minimum wage in the USA to $15 an hour, providing payments of $1,400 to most citizens and temporarily increasing unemployment benefits. This technical analysis of XAUUSD looks at the four-hour chart plus futures and annual futures.

High resistance here occurs around $1,955, the area of the latest high from the first week of January. Low support is less clear but the psychological area of $1,800 would be an obvious zone from which a bounce might be expected.

Technical indicators on XAUUSD H4


Moving averages are mixed. The 50 SMA from Bands has death crossed both the 100 and 200 since last week but the price has now moved back up, testing the 200 SMA. Meanwhile the 100 remains above both of the other two lines. The 50 SMA is a possible support in the short-term.

The slow stochastic (15, 5, 5) at 91 remains strongly overbought today and price is just barely inside the upper deviation of Bollinger Bands (50, 0, 2). Volumes does not give a clear signal although there was a spike in buying from noon GMT yesterday.

Price action and Fibonacci


The upward engulfing pattern from 12.00 GMT yesterday which was supported by volume would traditionally be taken as a fairly strong buy signal within the context of positive fundamentals. So far, though, there has been little follow through on this. Meanwhile the very quick bounce from midnight GMT on the 18th of January after price tested the 38.2% area of the weekly Fibonacci fan would suggest both ongoing demand for buying and this area’s importance as a support.

Apart from the fan, focus is on the 23.6% daily Fibonacci retracement which had been a strong support throughout last week. To the upside, the 38.2% retracement is the next main hurdle for buyers other than moving averages.

Futures on gold


technical analysis XAUUSD

This chart of futures on gold (COMEX, continuous with current contract at front) looks fairly similar to the spot CFD on gold-dollar. The main difference is volumes: we can observe a much higher volume of selling from 7 January but equally a bigger spike in buying volume yesterday.

Annual futures on gold


The 11-month contango for futures on gold from February to December is now around 0.7%. This small difference might suggest reluctance of participants in gold markets to commit when uncertainty remains as to the effects of stimulus in the USA. Low volumes of trading for every month except February and April seem to support this.

Technical analysis of XAUUSD: summary


Overall the technical picture for gold is somewhat mixed and suggests that many traders are waiting for new information before committing themselves. While the uptrend on higher timeframes remains active, relatively weak demand to buy in current areas might mean a movement lower. Volume for futures is a key signal to watch in the next few days of trading.

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