The XAU/USD pair (gold prices in terms of the US dollar) traded in familiar ranges on Thursday, witnessing extreme moves on both sides of the trade following the release of the Fed minutes. The prices spiked to 1151.20 highs in a knee-jerk to the Fed minutes, although quickly faded the spike and reverted to the pre-release levels, finding good support at the Fib 61.80% (last week’s decline) located at 1136.52. The prices failed to extend higher as the FOMC minutes revealed that the Fed governors remained concerned about the external headwinds to the US economic outlook, although failed to deliver a clear hint on the Fed rate hike plans this year.
As for today’s trade so far, XAU/USD extends its recovery mode from post-Fed minutes lows and regained momentum in the European morning. The prices edged higher in a bid to reclaim 1150 – psychological levels and beyond amid broad based US dollar weakness following the mixed minutes. Moreover, the yellow metal remains unperturbed by the risk-on rally seen in the global equities. Wall Street and Asian stocks cheered the expectations of further period of prolonged low-interests, as it offers respite to the corporates.
Looking ahead, the pair may continue to consolidate within the triangle pattern as dust settles over the Fed minutes while the US calendar also offers no significant data which would have major impact on the bullion. Also, Japanese, US and Canadian markets will remain closed on next Monday. Hence, thin liquidity will persist and the prices will continue to trade range-bound to higher.
Stuck within the triangular pattern, bulls eye a bullish breakout...but when?
On daily charts, the pair bounced-off a brief dip below the 100-DMA at 1142 and managed to regain the same. The prices now trade above the Fib 78.60% (the same fall) resistance located at 1145.54, extending its overnight recovery mode from near the key Fib 61.80% support. At 1146.50, the prices now look to test the daily highs at 1148. 92. A breach of the last, would expose the pair once again to the triangle resistance located at 1150.42 beyond which doors would open for 1155-1160 levels. The daily RSI at 57.75 also aims higher supporting the case for further advances.
While to the downside, the prices could revert to the 100-DMA support, below which the Fib 61.80% level would come into the picture. Further downside seems limited as the bullion remains underpinned by a weaker US dollar, after the Fed minutes, as the odds for a rate hike this year remains rather subdued, following unexpected non-farm payrolls in September.
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