Gold has charted a lower peak followed by a lower trough on a weekly time frame. This price pattern is the definition of a downtrend. We are looking at two indicators carefully. The RSI and stochastic readings are currently neutral, near their 50 levels.
However, there is a slight bearish bias. AS THE DOWNTREND CHARTED, the RSI has crossed to the weak side of 50 (green rectangle). If the momentum builds and it falls lower, and if the stochastic follows to its lower quintile and holds there (blue arrow), the precious metal will be under pressure from selling momentum.
We note that aggressive Fed hawkishness may pressurise XAUUSD as the greenback is supported. Moreover, this will exacerbate as the Fed looks to front-load its rate hikes in the coming months and normalise its balance sheet. Finally, we anticipate a 50bps hike when the Fed releases its statement tomorrow, with the caveat that a surprise to the upside is possible.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.