Technical analysis: Will the XAU/USD price continue rising?

Dmitry Lukashov IFC Markets

Recommendation for gold: Buy

Buy Stop: Above 1808.53.

Stop Loss: Below 1781.11.

Indicator	Signal
RSI	Neutral
MACD	Buy
Donchian Channel	Neutral
MA(200)	Buy
Fractals	Neutral
Parabolic SAR	Buy

Chart analysis

The technical analysis of XAUUSD price on the 4-hour timeframe shows XAUUSD,H4 is retracing after breaching above the 200-period moving average MA(200) which has tilted down. We believe the bullish momentum will continue after the price breaches above the upper Donchian boundary at 1808.53. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below 1781.11. After placing the pending order the stop loss is to be moved every day to the next fractal low indicator, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop-loss level (1781.11) without reaching the order (1808.53) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Fundamental analysis

The August US CPI report indicated the headline inflation ticked down to 5.3% over year from 5.4% in July. Will the XAUUSD price continue rising?

Current technical setup is bullish for XAUUSD. The Bureau of Labor Statistics reported yesterday the annual inflation rate in the US eased to 5.3% in August from a 13-year high of 5.4% reported in June and July, in line with market expectations. Last Friday data showed US producer prices posted another record increase in August: producer price index (PPI) jumped 8.3% from August 2020, not seasonally adjusted, the biggest increase since the data was first collected in November 2010. Both CPI and PPI indicate inflation pressure is high in US economy as it is recovering after the start of COVID epidemic as the central bank eased it monetary policy. And while policy makers had suggested they were considering tapering of purchases of bonds as inflation pressure built up, the recent data pointing inflation has probably peaked. This lessens the odds of an abrupt tightening of US monetary policy, which is also bullish for XAUUSD.

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Author

Dmitry Lukashov

IFC Markets

Dimtry Lukashov is the senior analyst of IFC Markets. He started his professional career in the financial market as a trader interested in stocks and obligations.

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