Technical Analysis

XAU/USD Technical Analysis

On the daily chart below, we can
see how the recent repricing in interest rates expectations led to a sell off
in gold. The precious metal is correlated with US real yields so when there’s
an expectations of those rising, gold prices generally fall and vice versa in
case real yields are expected to fall.

The repricing started when 2
weeks ago the NFP report came out very strongly
beating even the most optimistic forecasts. This led the market to think that
the Fed may indeed hike to their projected terminal rate and stay there for
longer. Then we also had strong ISM
Services PMI
and Retail
reports, and now the market is raising odds of an even higher terminal
rate from the Fed.

For the bulls, the price is
finding support at 1840 and the 38.2% Fibonacci
level. This may be the spot where we may see
buyers starting to bid. For the sellers, the moving
turned south signalling a changing in trend momentum and a bounce may
be a good opportunity to look for shorts.

On the 4 hour chart below, we can
see that the moving averages are acting as resistance for the lower timeframe trend.
There’s a divergence between price and the MACD right at the 38.2% support which should signal an imminent

We may see the price coming back
to the trendline and the resistance zone at 1860
before finding sellers. A break of the trendline to the upside should signal a
bigger correction to the 1902 level and that would be the last line of defence
for the sellers.

On the 1 hour chart below, we can
see the Fibonacci levels on the lower timeframe. A pullback to 50% or 61.8%
would be a nice spot for the sellers as there would be confluence with the trendline and the risk
would be defined. Again, a break out of the trendline should signal a bigger
pullback to the 1902 level.

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