Gold Price Forecast: XAU/USD primed for a falling wedge breakout on US stimulus hopes

Gold (XAU/USD) extends its three-day winning streak into Wednesday, mainly underpinned by the progress on the US fiscal stimulus talks, which diminished the haven demand for the US dollar. The greenback fell to fresh monthly lows across its main competitors after the US House Speaker and a Democrat Nancy Pelosi and Treasury Secretary continued to narrow their differences and moved closer to an agreement on a new aid package late Tuesday.

However, it remains to be seen if the yellow metal can see a sustained move higher, as the US 10-year Treasury yields hold near four-month highs on the stimulus optimism. President Donald Trump agreed on a large multi-trillion aid bill, in order to clinch a deal ahead of the November 3 election. The stimulus talks are likely to continue later on Wednesday and therefore, the sentiment on the global markets and US dollar dynamics will play a pivotal role for fresh gold trades.

Gold: Short-tern technical outlook

Daily chart

As observed in the daily chart, gold has dived out from the three-month-long falling channel formation, with closing above the falling trendline resistance at $1913.50 needed on a daily basis to validate a bullish breakout.

The downward sloping 50-daily moving average (DMA) at $1925 is likely to challenge the bulls’ commitment in the near-term. A sustained move above the latter could expose the October 12 high of $1933.30, beyond which the psychological $1950 level will come into play.

The 14-day Relative Strength Index (RSI) has recaptured the midline, now trading at 52.80, allowing for the further upside.

Meanwhile, the bullish bias remains intact so long as the price holds above the 21-DMA at $1896. Acceptance below the latter could open floors for a test of the 100-DMA, now aligned at $1877.