- The XAU/USD rallied after registering only false breakdowns below the immediate downside obstacle.
- The flag pattern could announce an upside continuation.
- A false breakout through the downtrend line could announce a new sell-off.
The price of gold was trading in the green at $1,720 at the time of writing. It seems determined to reach new highs after finding strong support at the former $1,714 low.
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Technically, the XAU/USD retreated after its last rally, but the correction seemed over, and the buyers could take full control again. In the short term, it moves sideways, trying to accumulate more bullish energy before jumping higher.
Still, it’s premature to talk about a larger upside movement as the fundamentals could change the sentiment today. The Federal Reserve is expected to increase the Federal Funds Rate by 75bps, from 1.75% to 2.50%.
The FOMC represents a high-impact event and could shake the markets. Anything could happen tonight. That’s why you need to be careful. XAU/USD may register sharp movements after the FOMC Press Conference and the FOMC Statement.
Also, the Durable Goods Orders, Core Durable Goods Orders, Pending Home Sales, Prelim Wholesale Inventories, and the Goods Trade Balance could bring more volatility. Fundamentally, the yellow metal tries to return higher even if the Australian Consumer Price Index reported a 1.8% growth compared to 1.9% expected versus the 2.1% in the previous reporting period.
Gold price technical analysis: Bullish momentum
The XAU/USD rallied, and it could try to approach the downtrend line and the 23.6% retracement level, which are seen as upside obstacles. As you can see, the price of gold found support at the weekly pivot point of 1,715.
It has tested and retested this downside obstacle and the former 1,714 low. The false breakdowns below these downside obstacles announced that the retreat ended and that the XAU/USD could develop a new bullish momentum. An upside continuation could be signaled by a valid breakout above the downtrend line and through the 23.6% retracement.
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The flag pattern could represent an upside continuation pattern. Activating this formation could bring new long opportunities. Only false breakouts through the near-term resistance levels could indicate a new sell-off.
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