After Last week's major break for the sideways congestion, gold plunged to five months fresh-lows at 1236.55 on Tuesday, then started upward correction first as a result of the deep down dips, second as a response to yesterday's FOMC's priced in news and a neutral statement without giving any new perspectives for 2018 outlook. The precious metal rallied yesterday from 1240.35, and recorded 1257.15 high. Today, gold extended the bulls action with only +$3 after clocking 1259.15 high, currently trading 1258 intraday.
On technical level, gold is currently test 10-EMA level at 1259 with expectations for 20-EMA testing at 1263-5 and in case gold closed above 10-EMA, this should be considered as first warning for trend reversal. Add to that, Tuesday's and yesterday's daily bullish grabbers support further upside action but it still early to determine if the upward correction is an introduction for trend reversal or the precious metal could drop beyond 1236 level, aimed at 1228 first, 1210+ area. Daily RSI was at 31 level on Tuesday, at that level, gold often started a bullish trend as market is oversold.
As for U.S dollar index, we can see that DXY bulls were contained by downtrend resistance line which was tested successfully and has formed a perfect head and shoulders pattern both on Daily and H4 time frame with AB leg = CD leg, and next target for the Dollar Index will be around 91.00 unless DXY rallied beyond 94.00 erasing the head and shoulders pattern, then we should expect more pressure on the gold.
Fundamentally, if we go back in memory, i late 2016 when the Feds hiked, gold showed an opposite reaction with a rally started from 1195 as market was already trading the fact that rates are done deal. Today U.S will release major data with Retail Sales in focus and depending on gold hourly behavior and daily closing price, we can draw a better technical image for XAUUSD next move.
XAU/USD and U.S Dollar Technical Overview:
MAR US DOLLAR Technical Overview
Closing price: 93.024
Target price: None
Resistance levels: 93.75, 94.05, 94.35
Support levels: 93.31, 93.16, 92.77
Trend: Sideways / Up
Trend reversal price: 92.77
Comment: The market shows a short term bottoming / bullish pattern, but rallies were capped by 93.755* resistance, prompting yesterday's drop off. Be prepared for near term negative / corrective action and chance to test 92.77* support. A close under 9277* signals a short term negative turnover, but initially suspect a bounce off 9277*. A close over 93755* is short term bullish and will spark further upside action at 94.05, next 94.35
XAU/USD Technical overview
Closing price: 1255.60
Target price: 1231
Resistance levels: 1257+/-, 1263.10*
Support levels: 1250.30-00, 1244.50*, 1231-
Trend: Down
Trend reversal price: 1263.10
Comment: Overall the market is bearish, still showing potential for a drop to 1231. Yesterday's spike higher starts near term corrections and we could see trade again try to rally. Corrections will likely find downside forces keeping trade in sideways congestion, stopped in the upper 1250's. A close over 1263.10* is needed to secure a reversing turnaround. A close under 1244.50* should renew selloffs/bear trending.