Gold Runs Another Strong Week, But Loses Steam in Familiar Setup

  • USDOLLAR
    (${instrument.percentChange}%)
  • XAUUSD
    (${instrument.percentChange}%)

XAU/USD Analysis

The commodity is having a very bad year, coming from a seven-month losing streak, succumbing to the might of the USDOLLAR, largely due to the Fed's frontloaded monetary tightening. Despite pointing to a slower pace ahead last week, it delivered another outsized 75 basis points rate hike and Chair Powell ruled out any pause, hinting at a higher terminal rate compared to the one projected in September. [1]

XAU/USD had dropped after the decision, but has since staged a relief-rally, running the second straight profitable week and the first positive month since March, as the greenback has deflated. It has narrowly averted fresh 2+ year lows in two separate occasions and the latest surge gives it the opportunity to push for the September highs (1,735). This would bring the 200Days EMA in its crosshair, but I am cautious around the ascending prospects.

Impressive as it may be, the relief-rally brings us to a familiar technical situation, as the precious metal had faltered ahead of the September highs around a month ago and the Relative Strength Index (RSI) is at the most overbought levels since that time.

As such, the technical outlook has not changed much from our last analysis. XAU/USD is still in a perilous state and there is scope for a return below the EMA200 (1,668-7), that would create risk for fresh 2022 lows (1,614). Furthermore, it has registered two weekly closes below the neckline of the Double-Tops formation and the 38.2% Fibonacci of the 2015 low/2020 high advance (1,682-76).

This month's return above it could invalidate the formation, but it is early for such call, as pullbacks of this kind is not uncommon in such formations. In any case, markets will now turn to Thursday US CPI inflation report for the next leg of the move.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 30 Nov 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221102.htm

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