Technicals Hint at Potential Upside but Dollar Strength May Cap Gains


XAU/USD and XAG/USD Talking Points:

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Gold and Silver Outlook

Gold looked on course for a second week of losses before a late rally on Friday saw the precious metal look set to post a doji candle close on the weekly timeframe. The continued hawkish rhetoric from Federal Reserve speakers coupled with Fed Funds peak rate now seen at 5% in comparison to 4,75% a week ago have added to the dollar’s rise as the resurgent dollar and rising yields continued to halt upside rallies. The precious metal is down more than 20% since its March high. Given inflation is still rampant and more rate hikes lie ahead there is every chance that a new YTD low could be in store for the precious metal as well as silver.

XAU/USD Technical Outlook


Source: TradingView, prepared by Zain Vawda

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Looking at the bigger picture, the overall downtrend on gold remains intact. Since price formed a double-top pattern on October 4 around the $1730 price level there has been an aggressive decline toward the YTD low around $1614. On Friday price tapped $1617, coming within a whisker of the YTD low before an aggressive bounce saw price rally $20 to the upside.

On the daily chart above the MA’s are some distance away from current price. A bullish daily candle close coupled with a weak dollar in the early part of the week could see price retest the 20-SMA while a break higher could see price rally toward the 50-SMA which rests around the $1685-$1690 area. Price seems to have printed a double bottom formation as well which could lead to a sustained upside rally next week before the Fed meet on November 2nd.

XAU/USD Four-Hour Chart

Source: TradingView, prepared by Zain Vawda

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The 4H chart provides further credence to a potential rally in the early part of the week as we have broken out of the falling wedge pattern. A rally toward the 100-SMA which lines up with the $1675 area on the 4H chart may be a possibility.

Trading the Falling Wedge Pattern

XAG/USD Technical Outlook

XAG/USD Daily Chart

Source: TradingView, prepared by Zain Vawda

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From a technical perspective, the weekly candlestick looks set to close as a bullish inside bar which would hint at a push higher next week. The daily chart seems to support further upside as well, as price has formed a double-bottom pattern. However there remains a lot of technical hurdles for silver to clear just above current price which may cap any potential gains moving forward. We have resistance around the $19 level while we also have the 20, 50 and 100-SMA resting between the $19-$20 price area. Given the confluence prevalent at these levels, a sustained break above the $20 area is needed if price is to push higher.

Alternatively, a break back below the ascending trendline and the $18.00 psychological level may open up a retest of the YTD low. Should this occur there is every chance price may print a new YTD low.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -4% -3% -3%
Weekly 2% 6% 3%

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— Written by Zain Vawda for

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