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Technical Analysis - Charts of the week

XAU/USD With $1800 possibly serving as a major pivot point at this stage. Viable Long positions while trading above $1800 level, Key resistance at $1815 and then $1828. If XAUSD trades below $1800 level, traders could look for possible short positions as sellers may retest $1790 and then $1770 support levels.

Below we review our charts of the week; Gold (XAU/USD) and the Euro (EUR/USD)

Chart of the week: XAU/USD

Gold prices struggle at $1808 as Covid jitters and the Dollar rises.

  • Resistance Zone: $1828 to $1835
  • Key Resistance Level: $1815
  • Support Zone: $1775 to $1770
  • Key Support: $1790
  • Major Pivot Point: $1800
    Trade Insights – With $1800 possibly serving as a major pivot point at this stage.Viable Long positions while trading above $1800 level, Key resistance at $1815 and then $1828. If XAUSD trades below $1800 level, traders could take short positions as sellers may retest $1790 and then $1770 support levels.

GOLD/USD CHART

Chart Analysis:

Directional bias: 2 Weeks GOLD/USD

Gold has failed to build upside traction above the $1830 level as the momentum in the yellow metal appears to be stalling now and probably turning downwards. The prices remain trapped between the seven-week-old descending resistance (Blue) line and the 200-day EMA. If bulls further lose control of the bears, coupled with a firmer US dollar we could see more downward action. To put it in numbers, if bulls fail to move the prices of gold above the $1815 level, it could result in a further drop towards $1770 in the next few weeks. We see that the $1800 level has the potential of acting as a major pivot point for the trading action in the short term. If the prices steadily defy the $1800 level, we can see another test of $1815 this week and then the next attempt at the $1830 mark. After this, the next resistance is at $1860. The monthly horizontal support is between $1790 to $1795 and if the prices are dragged below this range, then we can see a retest of the first $1770 and then the three-month low $1750 that was marked it June. Below that we have the support at $1730. Not to forget here the $1808 level that has also been quite important from the last two weeks that attracts back the prices from either direction to move them sideways.

Fundamental summary: Gold’s near-term direction is based on the risk catalysts like inflation rate, jobless claims, S&P 500 growth, bond yield rates, dollar strength, oil prices, and Coronavirus news. Joe Biden’s infrastructure bill and hopes of a strong Q2 earnings season are cited as failing bullish momentum. Covid conditions are worsening in Australia and the UK and against this backdrop, the S&P 500 has rallied from the lows of the last week. The COBE Volatility Index (VIX) has remained steady under a crucial value of 20, VIX is a 30 day forward projection of volatility (a gauge of market sentiment) based on SPX index options with near-term expiration dates. The 10-year Treasury yields have extended recovery from February lows to now around 1.22%. The US dollar index (DXY) has been rallying for the past 4 days and is about to test April’s Top at 93.40.

Chart of the week: EUR/USD

Inflow of Positive US Data pushing EUR/USD downward.

  • Resistance Zone: 119.45 to 119.70
  • Key Resistance: 118.50
  • Support Zone: 117.20 to 117.00
  • Key Support: 117.55
  • Major Pivot Point: 118.23
    Trade Insights – Viable Short positions below the major pivot point of 118.23 with the target of 119. Alternatively, possible Short Sell opportunities below 118.23 towards 117.55 and then to test the 117.00 level.

EUR/USD

Chart Analysis:

Directional bias: 2 Weeks EUR/USD

Apparently, Major Technical indicators signal Strong Sell on the daily chart. With the look at how the US dollar is trading, it seems like the support zone at 117.20 to 117 could be broken in this week or the next. If this crucial support cluster is broken, then we can see a strong following downward move. Before we see that happening, there could be a fake break of the Pivot at 118.23 to find resistance at 118.50 and reversal thereafter to retest the support zone at 117.55 first and then the next level of support at 117.00. The pair is now trading well below the 200 (Blue) and 50 SMA levels from the last 2 weeks. If the breakout towards the first resistance at 118.50 is not fake and the pair tests 119.45 then we could see a strong move higher, but probability remains low for such an event at this stage.

Fundamental summary: Several factors impact the EUR/USD valuations, including – ECB & US Fed monetary policies. Any movement in the US and Eurozone economic events determines the exchange rates. Other factors like Industrial production and CPI impact the value of the pair too. As the US economy is now moving from the recovery to the boom phase, we see the attempts to extend the free cash by FED will be halted sooner than later. Rates hike are quite possibly next year as inflation is surging and the continuous flow of positive US data is pushing the EUR/USD pair downward.

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Disclaimer

The information provided is of a general nature and is not intended to be personalised financial advice. The information provided is not intended to be a substitute for professional advice. You may seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances.

Trading in Rockfort Markets derivative products may not be suitable for everyone as derivative products may be considered as high risk. Please ensure that you understand the risks involved. A Product Disclosure Statement can be obtained here and should be considered before trading with us.

Vishal Rathod

July 22, 2021

  • Reading time: 6 mins
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