XAU/USD (gold price in terms of USD) extended the post-ECB extensive rally into a second day on Friday and rallied to the highest levels in thirteen months at 1283.01, before running into resistance once again above 1280. The prices corrected lower from thereon and gave up nearly $35 as the US dollar staged a solid recovery against its major peers and reversed more than a quarter of the ECB-induced massive sell-off. Gold prices also crashed as markets resorted to profit-taking as well as repositioning heading into the Fed decision. Technically, the prices breached the crucial 10-DMA support at 1253.87 and gave a daily closing below the last for the first time in 13 trading sessions.
As for today’s trade so far, the yellow metal attempts recovery from 1247.80 daily lows and now consolidates near session highs around 1257 levels, with the bulls gathering pace for further upside. However, every attempt to the upside gets sold into the resurgence of broad based US dollar strength as focus solely remains on the Fed decision due this Wednesday. Moreover, the European stocks joined the global risk-on rally and curbed the safe-haven demand for gold. Later today, in absence of no economic data on the cards, the prices will continue to remain in a wait and see mode, awaiting further impetus from the FOMC decision. Although a relief rally towards $ 1270, especially after Friday’s steep losses, cannot be ruled out.
Technicals –Negative price-RSI divergence on daily sticks
The daily chart for gold appears very interesting, with a clear bearish picture seen heading into the Fed decision this week. The daily sticks display the price-RSI negative divergence, indicating potential for bearish break from the recent upward trajectory. Thus case may hold true on the FOMC day, in case the Fed turns out hawkish/ less dovish than expected and surprises markets. In the meantime and ahead of Fed, we cannot rule out a relief rally in the prices as the daily RSI and turned higher and holds above the mid-lines, while the bullion manages to regain the 10-DMA barrier now a 1255.45 and consolidates at higher levels, for a next leg higher. Hence, the price finds the immediate resistance at 5-DMA (1258.82), beyond which doors open up for a test of 1265-1270 levels (previous tops). While, a failure to resist above 5-DMA today, the prices could once again test the 10-DMA support, below which selling pressure may intensify drowning the pair to 1250-1247 levels (psychological levels & daily low).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to marginal gains above 1.0750
EUR/USD trades in positive territory above 1.0750 in the second half of the day on Monday. The US Dollar struggles to find demand as investors reassess the Fed's rate outlook following Friday's disappointing labor market data.
GBP/USD edges higher toward 1.2600 on improving risk mood
Following Friday's volatile action, GBP/USD pushes higher toward 1.2600 on Monday. Soft April jobs report from the US and the modest improvement seen in risk mood make it difficult for the US Dollar to gather strength.
Gold climbs above $2,320 as US yields push lower
Gold trades decisively higher on the day above $2,320 in the American session. Retreating US Treasury bond yields after weaker-than-expected US employment data and escalating geopolitical tensions help XAU/USD stretch higher.
Addressing the crypto investor dilemma: To invest or not? Premium
Bitcoin price trades around $63,000 with no directional bias. The consolidation has pushed crypto investors into a state of uncertainty. Investors can expect a bullish directional bias above $70,000 and a bearish one below $50,000.
Three fundamentals for the week: Two central bank decisions and one sensitive US Premium
The Reserve Bank of Australia is set to strike a more hawkish tone, reversing its dovish shift. Policymakers at the Bank of England may open the door to a rate cut in June.