After last week's major break for the sideways congestion, gold plunged to fresh five-month lows at 1236.55 on Tuesday, then started an 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. The precious metal rallied yesterday from 1240.35, and recorded a 1257.15 high. Today, gold extended the bulls action with only +$3 after clocking 1259.15 high, currently trading 1258 intraday.
On the technical level, gold is currently test 10-EMA at 1259 with expectations for 20-EMA testing at 1263-5. If gold closes 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 is 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 the 31 level on Tuesday. At that level, gold often started a bullish trend as the market oversold.
As for U.S dollar index, we can see that DXY bulls were contained by the 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. The next target for the Dollar Index will be around 91.00 unless DXY rallies beyond 94.00 erasing the head-and-shoulders pattern, then we should expect more pressure on gold.
Fundamentally, if we look back, in late 2016, when the Fed hiked, gold showed an opposite reaction, with a rally that started from 1195 as the market was already trading.
XAUUSD 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
XAUUSD 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.