Gold 1 OZ (XAU=X) Bulls Held at Bay in Front of Big Data Week
It’s a big week for US data with high-impact releases set for every day in the remainder of this week. Key of which will be tomorrow’s FOMC rate decision along with the Friday release of Non-Farm Payrolls, each of which can help to keep price action in the US Dollar on the move. And perhaps surprisingly, despite the US Dollar’s reversal in the first few weeks of Q4, Gold prices remained in a state of digestion, sticking within a bull flag formation that’s built after August and September swing-highs.
The resistance side of that bull flag began to get tested late last week, with likely drive coming from anticipation around this week’s calendar events. Sellers stepped-in at the October highs helping to hold the advance at bay for now.
After the +34% jump in Gold prices from last August into this September, the natural question is one of continuation potential. Gold bulls remained strongly in-charge of price action throughout this summer, posing an extension of that move from June into last month that brought six-year-highs into play. This comes after a three-month-stretch of digestion that spanned from February into May, highlighting a similar scenario to what appears to be showing now.
The big question at this point is when might Gold bulls jump back into the matter? Given the reversal in the US Dollar, it could be rightfully questioned as to whether they’ve thrown in the towel; but if one drives back to the source of that USD-weakness, emanating from positive items getting priced into counterparts such as the Euro or the British Pound, each of which have rather heavy weightings in the DXY basket, and it makes sense as to why Gold prices didn’t break-out as the US Dollar broke down.
In early-June, that driver was the Fed getting more dovish and opening the door to rate cuts. And the bank has now cut twice but this has happened without the assurance of more cuts happening down-the-road. When or if the Fed does signal additional oncoming rate cuts or, perhaps even, more stimulus, Gold prices will likely respond in a very bullish way. The big question is whether this happens at the October rate decision tomorrow or the December rate decision later this year.
Given the fact that this bull flag has retraced 23.6% of that recent bullish move spanning back to last August, combined with the fact that this retracement began as Gold prices moved to their most overbought level on the weekly chart since 2011; and motive does remain on the long side of the matter, looking for buyers to make a re-appearance, at some point, to drive to fresh six-year-highs.
At this stage, the resistance zone that came into play in early-August has helped to thwart the bullish advance. This runs between two Fibonacci levels at 1509 and 1527, with the October swing-high showing around the 1520 level. A topside test above the 1527 level opens the door for bullish continuation, as this can be seen as a signal of buyers getting a bit more aggressive to produce fresh monthly highs indicating that the bull flag break may already be underway.
On the support side of the matter, the zone that runs from 1475-1480 has continued to hold the lows through much of October trade, now surviving through multiple tests. But, given that FOMC disappointment in which the bank is more hawkish than what markets are looking for will be the likely driver of lower prices in Gold, and this support zone may not be as attractive given its proximity to current price.
A bit lower is another zone of interest that runs from the July swing-high of 1453 up to the October swing-low of 1460 to produce a secondary zone of support potential. Below that is one additional zone of interest spanning from the Fibonacci level of 1421 up to 1433, which had previously helped to hold the highs in June-July trade but, as yet, hasn’t been tested for support.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1,524.19.
The projected lower bound is: 1,453.10.
The projected closing price is: 1,488.64.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.0692. This is not an overbought or oversold reading. The last signal was a buy 19 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.78. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 44 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -37. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 3 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -3.445 at 1,489.000. Volume was 8,900% above average (trending) and Bollinger Bands were 65% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,492.35 1,504.35 1,382.56
Volatility: 8 15 14
Volume: 8,358 1,672 418
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 7.7% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 2 periods.