technical analysis XAUUSD

Technical analysis of XAUUSD

Gold has moved up on the whole so far this week despite the relative decline of last week’s risk-off mood. Underlying fundamental factors – primarily a weaker dollar and record loose monetary policy – have come back to the fore since yesterday.

High resistance here is the latest top around $1,973, although we can probably expect the 200 SMA to provide a barrier to upward movement in the shorter term. Low support is the low from two weeks ago around $1,854.

Technical indicators on XAUUSD H4

 

Moving averages continue to give a sell signal, with each of the 50, 100 and 200 SMAs successively above slower lines. However, price has now moved above the 50 and 100 SMAs, so the former might become a zone of support later in the week. The current test of the 100-period simple moving average has yet to confirm success, but if it does the next target for the bulls would be the 200 SMA.

Although neither Bollinger Bands (50, 0, 2) nor the slow stochastic (15, 5, 5) currently give an overbought signal, both are very close to the zone of buying saturation. Volume remains fairly low so far this week. In general, technical indicators suggest that the current upward wave has room to continue.

Price action and Fibonacci

 

Friday morning’s upward engulfing candle and two large up candles from 8.00 GMT yesterday would usually be understood as signalling more gains. However, price action has been somewhat hesitant around the 100 SMA, so traders are likely to watch behaviour closely if price continues to fluctuate mildly within the current area.

Price has now moved clearly back above the upper zone (38.2%) of the weekly Fibonacci fan, so the 38.2% daily retracement seems to be the main area of focus in the immediate future. This will soon coincide with the 200 SMA and present a likely area of strong resistance. To the downside, the 50% daily Fibonacci retracement doesn’t appear to be noteworthy yet but could still be a support in the event of a relatively deep retracement on the hourlies.

Futures on gold

 

technical analysis XAUUSD

This daily chart of futures (COMEX, continuous with current contract at front) displays a similar picture to the spot CFD. We can see a reasonably strong bounce over the last week or so from the latest low amid fairly high buying volume.

Annual futures on gold

 

While the small contango for annual futures on gold remains, contracts for the next six months are still adjusting to changes in sentiment last month. The contango at a bit less than 2% suggests smaller ongoing gains for gold over the next few months.

Technical analysis of XAUUSD: summary

 

Overall the technical picture for gold is quite positive, but any momentum upward this week is likely to be much weaker than that at the end of the second quarter of 2020. Short-term volatility could be expected after the release of the FOMC’s latest minutes tomorrow night.

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