Gold collapsed by 7% in less than 48 hours induced by NFP news.
- Resistance Zone: $1771 to $1780
- Key Resistance Level: $1754
- Major Pivot Point: $1733
- Key Support Level: $1700
- Support Zone: $1675 to $1685
- 50 Day SMA – Green Line
- 100 Day SMA – Red Line
Trade Insights – ViableLong positions above the Pivot at $1733. Potential Long positions targeting the key resistance at $1754 and if Buyers are in charge, then further upward move towards the resistance zone of $1771 to $1780.
Alternatively, if prices fall below $1733 then possible short positions towards $1700 the key support level Sellers may test 1675 again to push prices further down. $1675 appears to be crucial support at this stage.
XAU/USD Daily Chart
Directional bias: 1 Week XAU/USD
Technical Analysis of XAU/USD daily chart shows that after retouching the peak of 1831 on 4th August the pair collapsed in the next 3 sessions by almost $150. There was a follow-up recovery by $50 in just the first few hours of the downfall move on Monday morning proving that the selloff was apparently overdone. The immediate cause was a strong NFP report on Friday last week. The unemployment rate fell by 0.5ppts to 5.4% vs 5.7% as was expected by the market in general. This raised the likelihood of an upcoming announcement to change the interest rates by the Fed Reserve. The selling in the early hours was quite overdone probably was a response to the selloff on Friday after the NFP news. There was thin liquidity in the early hours and more so as the Japanese market was closed on Monday, which led to a heavy selling spree.
Coming back to the chart it shows that the support and resistance zones have changed now. The new resistance zone is at $1771 to $1780 that is also the cluster where important Fibonacci levels meet. New support zone is at 1675 to 1685 as from here the prices jumped back up to recover by almost $50. As of now, the prices are sitting in the middle of the major zones right at the Pivot of $1733. Any move higher from here could test the key resistance mark at $1754 and any move lower may find support at $1700.
Fundamental summary: The start of this week was very dramatic for Gold and other currency pairs. In the early Monday morning trading this week, precious metals and Oil started with huge volatility and a steep downward fall/collapse that was recovered halfway in the first few hours. We can notice from the chart that a similar downturn in Gold occurred in Feb 2021 just around when traders and investors realized the scope of Covid related Economic impacts. The few important questions that now have appeared are - Is the US market and post covid recovery already at its peak? Was the collapse of Gold a preview of any upcoming major volatile event? Is major change coming in Fed Reserves tapering and interest rate policies? The answers to these questions are well hidden in future however we can at least brace up for more volatility soon and be more cautious. There may be opportunities that may arise when the dust settles down.
NFP moved EUR/USD to 5 months low, CPI news to be the next catalyst.
- Resistance Zone: 119.0 to 119.15
- Key Resistance: 118.34
- Major Pivot Point: 118.55
- Key Support: 118.23
- Support Zone: 116.40 to 116.20
- 50 Day SMA – Green Line
- 100 Day SMA – Red Line
Trade Insights – Apparently the EURUSD pair has found support and consolidating above the key support level. Viable Long positions above 117.20 are the Key support level on the chart. If the prices move higher from here, the first test is apparently at the Pivot of 117.20 and then a next possible test of Key Resistance level at 118.34.
Alternatively, if Sellers remain in charge for now, then Viable Short positions below the Key support level to test the long-term support cluster at 116.40 to 116.20. The Next support after the possible downward move is at 114.95.
EUR/USD Daily Chart
Directional bias: 2 Weeks EUR/USD
As the analysis showed in our last week’s chart that the EUR/USD pair fell after the 50-Day SMA and 100-day SMA crossed at 1.190. The recovery was weak, and the pair has continued the downtrend propelled by selloff after the strong NFP data and news on Friday last week. Chart Analysis of EUR/USD pair shows that the prices are just consolidating above the key support level of 170.28. The support zone has moved further down to the long-term support cluster at 116.40 to 116.20 which was touched in November 2020. There are possibilities that this level could be tested again as we move forward as the markets wait for more news coming out of the Fed Reserve’s office by the end of the month on Asset Purchase tapering and interest rates increase. The US CPI data will be released today, which could be the main catalyst in deciding the direction the EUR/USD could take.
However, if the prices manage to stay above the key support level at 170.28, we could see a recovery towards the Pivot of 117.20. If prices could hold above 117.20 then another jump in prices could be observed to test the key resistance level of 118.34. The next resistance Buyers might face is at the Resistance zone of 119.0 to 119.15
Fundamental summary: The month of August has no more remained neutral and has witnessed one of the sharpest falls in the EUR/USD a straight drop in 8 consecutive sessions that rarely happens in several years. US data on CPI will be released today and this could very well become the catalyst to decide the direction of EUR/USD.