The XAUUSD weekly chart is showing weakness. This fragility is due to its lower peak (LP) followed by its lower trough (LT), which is the technical definition of a downtrend. Therefore, we watch the latest weekly candles to see if the price action will chart the next lower peak (LP?) in the series.
The daily chart on the right is helpful in this regard. It may be charting a rising wedge (converging turquoise lines), a bearish continuation pattern. However, XAUUSD must break below the lower turquoise line for it to complete.
The higher yields will have a role to play here, given that XAUUSD is a ratio, with the greenback as the denominator. The US inflation numbers on Friday, thus, become essential to consider as the Fed looks to continue with its contractionary monetary policy. However, the big unknown is its balance sheet reduction. The magnitude of its effect as liquidity siphons out of the economy may have an unanticipated impact.
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.