Tag: Gold

Forex Trading Idea Gold

Nicholas

Strategy

Sell $1816. Stop above $1835 and target at $1765. Trade duration estimated to be around 2-3 months.

Technical View

After reaching a low of $1697.37, price has managed to recover but was capped by a previous high resistance at $1834.00. This is the second time this resistance has capped the price rally. This resistance level is also the Fibonacci 62% correction point of the decline from a high of $1916.43 to the low of $1697.37. If price fails to move above the Fibonacci 62% correction point, it is usually a sign of a corrective move. This would mean the rally was corrective and the next move for price would be down If price is unable to move above this high, price is likely to be moving lower. A bearish Harami candlestick price pattern adds to the bearish call.

Stochastic has a bearish crossover in the overbought zone and is moving lower, hinting of a price decline. MACD remains bullish but we could see a bearish MACD crossover, which would turn the trend from bullish to bearish. Currently 20EMA remains bullish with price above the 20EMA line. The first point to decline would be the low point of a big gap at $1764.55 and this is also the target for our sell recommendation.

Fundamental View

The US dollar may be languishing at a 1-month low and last Friday’s non-farm payrolls data adds to the greenback’s weakness but the data showed the US labour market is recovering. This is a sign that the US economy is slowing picking up the pieces from the depth of the COVID-19 pandemic. While labour situation is still nowhere near to the Federal Reserve benchmark to start tapering, it is a matter of when and not if; there will be a tapering and an eventual interest rate hike down the road.

Recent US data are also hinting that inflation could be transitory as predicted by Fed’s chairman Powell. He has insisted that inflation would be temporary and this is one of the reasons he will keep interest rate to help the US economy to recover from the COVID-19 pandemic. With Federal Reserve keeping interest rate and only hiking rate when the economy is on a strong footing, it is likely we will see an economic uptrend and growth down the road.

Infection cases are still high in the US despite vacations and another wave of COVID-19 infection could send the US dollar appreciating in value against Gold. “Risk on” environment is also likely to aid the US dollar more than Gold should be highly contagious Delta variant start to spread again.

Gold – Is The Short Term Rally Over?

Nicholas

Gold seems to have form a 5 waves movement to the high at $1783.58 on the hourly chart. It may also be an final part of an A-B-C correction, with the C part, ending at the Fibonacci 127% price projection target. This correction had started from the low of $1723.60. MACD has given a divergence warning of a possible price high on the hourly chart. Stochastic is already in the overbought extreme. We are likely to see a quick return to $1760. Above $1783.60 would negate our short term bearish view.

Sell $1775 for $1760 with a stop at $1784.

FOREX TRADING IDEA Gold

Nicholas

Strategy
Buy Gold at $1920 for a movement to $2075. Stop should be placed below $1882

Technical View
Price broke out of a down trending channel on the first trading day of the year and this could be the start of an uptrend that could bring price to test the Fibonacci 62% correction point of the decline at $1956. A move beyond this point could be the start of a rally to test the previous high of $2075. Earlier, the price decline was halted at the Fibonacci 50% of the rally, which is a hint that the decline was a correction of the previous rally from $1440 to $2075.

20EMA has turned bullish and is moving higher. MACD has also turned bullish and is moving higher as well. Stochastic is moving higher but has not reached the overbought zone. Momentum indicators are hinting of a price rally.

Fundamental View
Monetary policy in the United States is likely to keep the US dollar weak. The US Federal Reserve has hinted of keeping US interest rates low for the next 2 years till 2022 to help the US economy fights against the current slowdown due to the coronavirus pandemic. This is likely to take away the big advantage that had kept the US dollar strong in the past few years. Beside ultra-loose monetary policy, the Federal Reserve is likely to embark on a prolong program of bond buying to keep interest rates and yields low. This is likely to keep the US dollar weak.

Fiscal policy is also likely to keep the US dollar weak. A US stimulus relief package has been passed by Congress which gives US citizen a US$600 cheque. This package is to help its citizens cope with the coronavirus pandemic. However, there are calls for a US$2000 cheque. This massive amount of money, in addition to an earlier US$5 trillion, is likely to weaken the US dollar. While fiscal policy is likely to weigh on the US dollar, monetary policy is also going to add to the weigh hanging over the US dollar.

Coronavirus pandemic is also likely to weigh on the US dollar. While a COVID-19 vaccine is at hand, supply of this vaccine in the near term is unlikely to meet demand for it. In the US, coronavirus cases are still on the rise, which had led to many states imposing restrictions. This could have an adverse effect on the US economy. The US dollar will weaken if the US economy weakens.

Gold – 2 Possible Scenarios. We prefer the bullish Scenario.

Nicholas
Gold has climbed from $1045 back in Dec 2015 to a high of $2074.95 on 2 August 2020. But is this the high or can Gold go higher? Looking at the monthly chart, it seems that the rally is not completed. We are likely to see another attempt for the topside to complete rally. While Stochastic is in the overbought zone, MACD is high above the zero line, which is a sign of a strong bullish trend. 20EMA is also point up with a steep slope, which is also hinting of a bullish price trend ahead.
If we take $2074.95 as the high, we can see that the correction unfolded in a A-B-C manner on the weekly chart with the C almost equal to A. The correction came down to the Fibonacci 38% of the rally. As the correction was in the form of a price decline, the main trend is bullish. If $1764.40 is the end of the correction, we are likely to see price testing the previous high and going higher than $2075 in the next few months ahead. Stochastic is turning up from the oversold zone and MACD is also turning up from the zero line. Momentum indicators are hinting of a price rally ahead, which support the bullish view.
There is also the possibly of a larger or bigger correction. In this scenario, we could see price moving higher to the previous high of $1964.40 and if price is unable to move above this resistance point, there is a possibility of a bigger A-B-C correction which could bring price lower to $1681 in the next few months. Watch out for the trigger point at $1965. We do not favour this scenario. We are bullish for $2100 in the next 3-6 months ahead.