Technical analysis of XAUUSD

Gold has retraced somewhat since this morning GMT as the dollar found some strength in early trading. An annual drop of 38.25% in Chinese consumption of gold hit sentiment somewhat in the early morning. Nevertheless, fundamental strength is likely to remain given that covid-19 shows no signs of slowing down significantly in many countries and central banks continue record quantitative easing. Today’s technical analysis of XAUUSD looks at areas on H4 in the runup to the FOMC‘s meeting tomorrow evening GMT.

The main resistance here is the latest high around $1,980. Low support on this chart is the source of the latest upward wave around $1,800. However, this latter area probably won’t be tested in the near future, with zones based on moving averages and Fibonacci of higher importance.

Technical indicators on XAUUSD H4

Moving averages continue to give a strong buy signal, with the 50 (from Bands), 100 and 200 SMAs successively above each other and below price. The spaces between these SMAs have grown over the last few periods. The 50 SMA from Bands which coincides with the hourly 61.8% area from the Fibonacci fan is the first important zone of support from moving averages.

Price has now moved clearly out of overbought on this timeframe based on both Bollinger Bands (50, 0, 2) and the slow stochastic (15, 5, 5). The absence of a clear crossover of the stochastic suggests that it’s too early now to look for a deep retracement, especially with volatility likely tomorrow evening GMT. Selling volume spiked over the last couple of periods, which probably reflects profit-taking and short-term counter-trend trades.

Price action and Fibonacci

There was no traditional reversal pattern last night to presage this morning’s losses; in fact, the candle from 20.00 yesterday had a large real body and nearly no visible wick. The more noticeable wick and tail of the period from midnight would usually suggest hesitation and a ‘battleground’ between buyers and, in this case, short-term sellers.

The reaction against the recent test of the 38.2% area of the four-hour Fibonacci fan seems to indicate ongoing strength. For longer-term buyers, a deeper retracement to the same area of the daily Fibonacci fan might be awaited before entry. We can probably expect most of the Fibonacci areas on this chart to provide support this week.

Futures on gold

Futures on gold (NYMEX) remain somewhat confused in the early afternoon GMT, with various contracts reacting more quickly or more slowly. Both August and December’s futures, the highest traded contracts here, have reflected movements by the spot CFD quite closely although maintaining the contango of about 1.5-2% over the four months. There isn’t a clear signal for spot XAUUSD here, but this is pretty unsurprising considering the FOMC’s meeting tomorrow.