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Gold Update: Recent Dump Conceals Ultra Bullish Outlook

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The Gold/US Dollar (XAU/USD) pair looked ripe for a massive breakout early this year. Bulls were raring to kickstart an uptrend as they mounted multiple attacks to take out resistance of $1,355. Unfortunately, momentum significantly waned after each failed attempt. Eventually, bulls retreated like a battered army fleeing from what seems to be an unconquerable fortress.

Bears may have won the battle but they are losing the war. In this article, we reveal how this pullback puts Gold in a position to launch a massive bull run.

Gold Bearish Exhaustion on the Daily

XAU/USD lost over 11% of its value in three months. Those who bought near $1,355 in anticipation of a breakout would have likely cut their losses. This explains the bearish flag and bearish pennants on the daily chart. Numerous stop losses were triggered at certain price points.

While many investors would have been upset by the disappointment, this retracement can’t go on forever. In fact, a closer look at the pullback shows that bears are losing momentum.

Daily chart of XAU/USD

Usually, a bearish or a bullish run could only generate three continuation patterns in the form of flags and pennants. Exhaustion sets in after the third continuation pattern and that’s what we’re seeing in the daily chart of XAU/USD.

Both the RSI and the MACD are flashing bullish divergences. On top of that, the RSI is in oversold territory while the MACD line has just crossed the signal line for a bullish cross. If that’s not enough, the trading range is tightening as the pair gets to the narrowest point of a falling wedge.

A reversal is in sight and with it comes renewed hope for bulls.  

Bullish Reversal Pattern on the Weekly

The short-term bearish outlook hides the possibility of a bullish reversal in the near future. Switch to the weekly chart and you’ll see that XAU/USD is on track to print a bullish higher low setup. More importantly, the pair appears to be respecting a three-year trend line.

If this is the case, then the recent drop appears to be the E-wave or the last leg down of an ascending triangle pattern.

Weekly chart of XAU/USD

Considering the bearish exhaustion on the daily, it is highly probable that the pair would stay on top of this trend line. That should put XAU/USD in a very good position to finally claim the $1,355 resistance level. Above $1,355, there’s little that can hold Gold back.

Minimal Resistance After the Breakout

If XAU/USD breaks out of the ascending triangle pattern, there’s little that can stop the pair from making new highs. A look at the monthly chart reveals that the pair might struggle around $1,498.97 and at $1,830. The former is the 78.6% Fibonacci level while the latter is the last line of resistance. Take out those two and the coast is clear.

Monthly chart of XAU/USD

Once $1,355 is breached, the sheer force of the breakout should make it easy for bulls to take out $1,498.97. By then, bulls have one more obstacle in $1,830. All time highs are often tough to breach. However, a fresh uptrend from the breakout of $1,355 should make it very likely for XAU/USD to register new all time highs.

Bottom Line

Gold has been bearish recently. However, it appears that this weakness is a temporary setback. A look at longer time frames reveals an ultra bullish outlook for XAU/USD.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.8 stars on average, based on 288 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Forex Update: Dismal Chinese Data Causes Turmoil in Markets

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1302 -0.47%
GBP/USD 1.2571 -0.68%
USD/JPY 113.35 -0.21%
AUD/USD 0.7179 -0.66%
GOLD 1,243 -0.20%
WTI Crude Oil 51.16 -3.18%
BTC/USD 3,180 -2.54%

We continue to have an unusually active December in traditional financial markets, as the recent bearish shift, the continued Brexit woes and the slowing global economy add up to a very nervous trading environment. Volatility is especially high in stock markets compared to seasonal averages but currencies are also having very active days, with the Dollar clearly being in focus.

Today we had negative headlines in China with both industrial production and retail sales missing the consensus estimates by a mile, and the history of manufactured economic releases from the country makes that even scarier.

It’s no surprise that the Chinese stock market is leading the way lower globally, while the Chinese Yuan is also among the weakest currencies globally, even amid the improving trade-related sentiment. Risk-on currencies got it hard today, and the Dollar is defying its bearish seasonality, trading very close to its recent lows, confirming the broad risk-off shift.

Technical Analysis

GBP/USD, 4-Hour Chart Analysis

The Great British Pound continues to trade with pronounced relative weakness, and as Prime Minister Theresa May was sent home empty-handed from Brussels, with the leaders of the EU refusing to renegotiate the draft Brexit plan, the currency’s position just got even shakier.

From a technical standpoint, the Cable confirmed the key breakdown with a failed pullback in the past couple of days, and with no major support found above the generational lows near 1.20, long-term odds now favor a test of that zone, and bulls shouldn’t enter positions below the key 1.27 level.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.13 level after yesterday’s the dovish growth and inflation forecast by the European Central Bank and today’s strong US Retail Sales report. The US economy continues to perform relatively well compared to its global peers, and although we think that the slowdown will eventually reach the US, the fiscal stimulus and the labor momentum could keep the engines going for a while.

That only adds to the buying pressure which is pushing the USD higher, and the troubles in the European financial system are also mounting, which could lead to another leg lower in the common currency next year. The main technical levels to watch are still the 1.12 support and the 1.1440 resistance, and with the broader downtrend clearly being intact in the most traded currency pair.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair fell below the bearish wedge pattern on the negative Chinese news as we expected, and it’s now testing the 0.7165 support zone. A move towards the 0.70 level is likely in the coming weeks, should the pair violate the support zone, and the short-term trend change is close to being confirmed, while the broader downtrend is clearly intact, with strong resistance ahead near 0.7250 and 0.74.

WTI Crude Oil, 4-Hour Chart Analysis

Another rally attempt faded away today in crude oil, and the crucial commodity continues to trade in a bearish consolidation range following the series of dead-cat-bounces. The top of the range is found near the $54.25 per barrel price level, while strong support is found in the $49.50-$50 per barrel range.

Given the deeply oversold long-term momentum readings, bulls can open speculative long positions near the bottom of the range, despite the clearly intact long-term downtrend, while bears should wait for a larger scale bounce to reenter the market.

Key Economic Events on Monday

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 416 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

XRP Trading Sideways as UAE Exchange Adopts Ripple for Overseas Payments

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Ripple (XRP) is trading around $0.3030 on Friday, without any major changes, reports Dmitriy Gurkovskiy, Chief Analyst at RoboForex.

The price tested the midterm descending channel resistance, and now is finishing its short term sideways correction. The XRP is trying to break out the local support, which would allow the price to go down to reach the major channel support at $0.2630. The major midterm target, however, is the fractal support at $0.2365. The resistance is meanwhile at $0.3135.

Fundamentally, UAE Exchange is ready to start running overseas payments based on the Ripple platform. This will be launched in early 2019, mostly in Asia.

This news was first mentioned in Feb 2018, when UAE Exchange highlighted blockchain’s powerful opportunities, but also noted this needed a lot of development before implementation. Blockchain really offers a medley of opportunities to the exchange, as it will help it become a leader in the Middle East. At first stage, however, UAE is going to work with just one or two Asian banks.

In 2017, the overall amount of overseas payments in Asia was at least $613B, with the major part coming from the Middle East, from where employed people sent their money to their home countries.

Ripple will be using RippleNet for overseas payments, which will allow the exchange to boost the transaction speed, thus quickly conquering the mobile and online payment market.

Ripple already succeeded in similar projects over the last few months, in Malaysia and South Korea. The Middle East is even more attractive, though, with lots of opportunities awaiting.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 20 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Analysis

Crypto Update: Majors Testing Lows Following Broad Selloff

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The major cryptocurrencies have been once again under pressure in the past 24 hours and most of the coins got very close to their recent lows, even as the losses are limited for now. While the top coins avoided a breakdown, given the overwhelmingly bearish long-term picture and the steep short-term trend, odds continue to favor new lows in the coming weeks, so traders and investors should still remain defensive.

Dash/USD, 4-Hour Chart Analysis

The continued technical weakness in the lagging coins, like Dash, and the lack of a relatively strong leadership is still apparent, and it reinforces the bearish overall picture. That is true even as the long-term momentum indicators are showing deeply oversold readings and investors sentiment remains very negative which could lead to a larger scale correction after a short-term trend change. That said, traders shouldn’t enter new positions here until we see meaningful short-term technical improvements.

BTC/USD, 4-Hour Chart Analysis

Bitcoin failed to regain momentum despite the weekend bounce and the coin is back near its recent low trading near the $3250 level today. The key $3600 level is out of reach for the most valuable coin, and with that in mind, our trend model remains on clear short- and long-term sell signals.

The current weakness of BTC is a negative sign for the whole segment, and a test of the key long-term $3000 level is more and more likely. Further string resistance is ahead between $4000 and $4050, and traders and investors shouldn’t enter positions here.

ETH/USD, 4-Hour Chart Analysis

Ethereum has been trading in a very narrow range in recent days, and the coin is still stuck below the key $95-$100 zone, as it failed to show relative strength despite being among the most oversold majors. ETH also faces strong resistance near $120 and $120, with the next major support zone found between $73 and $75, and traders and investors should still stay away from the coin.

Litecoin Breaking Down Again?

LTC/USD, 4-Hour Chart Analysis

Litecoin is threatening with another break below support today, with the $23 support level looking very weak now, and the steep short-term downtrend remains clearly intact in the coin. LTC continues to be relatively weak from a short-term standpoint, and traders shouldn’t consider even ultra-short term positions here, despite the deeply oversold broader picture.

The next major support zone is found between $20 and $20.50 and odds favor a test of that zone as soon as in the coming days, with strong resistance found near $26 and $30.

XRP/USDT, 4-Hour Chart Analysis

Ripple continues to hover around the $0.30 level, still being very weak on the short-term time-frame, and being on sell singles both short- and long-term in our trend model. XRP faces strong resistance near $0.32, $0.3550, and $0.3750, while primary support is found at $0.28, with the prior bear market low being at $0.26. We expect at least a test of the lows in the coming weeks, despite the still relatively strong long-term technical setup and new low bear market lows are also likely in Ripple.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 416 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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