Gold prices on Tuesday remained near the previous trading session levels. However, it was getting squeezed in between technical levels. The event was signalling that a break out might occur in the near future.
If one watched the patterns on the daily and hourly chart, it can be observed that it is more likely that the pair will break out to the downside.
The Federal Reserve releases US FOMC Meeting Minutes where fed officials provide in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates.
The meeting summary stated, "With an increase in the target range at this meeting, the federal funds rate would be at or close to the lower end of the range of estimates of the longer-run neutral interest rate, and participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier."
Brexit takes all attention
Fundamental data traders will mostly pay attention this week to the Brexit vote at the UK's Parliament. Meanwhile, macro release traders will still have events to watch and trade.On Tuesday, at 13:30 GMT the US Producers Price Index will be published. The release will be covered mainly due to Dukascopy Analytics sticking to the rule – If it causes 10 pips, we over it.
US PPI causes mostly just above ten pip moves. Enough to trigger a trailing stop loss, but not enough to actually change a strategy.
On the same day note that the ECB President Draghi will testify before the European Parliament in Strasbourg. Some of his comments might cause an increase of volatility in the EUR pairs.
On Wednesday, at 09:15 action will begin in the UK. Namely, at that time the Bank of England Governor Carney will report to the UK treasury about his actions. Most likely he will report how he dealt with Brexit volatility and lay out the bank's future scenario in regards to the results of the Parliament vote on Tuesday.
Simultaneously to the reporting of Carney, the UK CPI will be published. This data release usually causes moves of around 20 base points. However, this time Dukascopy Analytics expect all attention to be taken away by the Carney's report.
Besides a speech at the G20 Meetings by Bank of Japan's Governor Kuroda at 03:20 GMT, there is nothing on Thursday to watch.
On Friday, two data releases will be covered by Dukascopy Analytics.
At 09:30 GMT the UK Retail Sales will be published. Around 10-40 base point move can be expected during the event.
The biggest event of the will occur at 13:30. The Canadian CPI will be published. On the USD/CAD there are 30 pip moves even when it hits the forecast. When the data is different there have been 40-85 pip moves.
XAU/USD short term forecast
During Tuesday's morning hours, the yellow metal passed the support levels of the simple moving averages to trade at the 1,288.83 mark.
In regards to the near-term future, most likely, the gold will be depreciated against the US Dollar due to the resistance of the simple moving averages. Moreover, the yellow metal might trade at 1,284.00 level during the day.
However, the gold could appreciate against the US Dollar to the 1,292.00 level during today's US PPI and Core PPI data releases at 13:30 GMT.
Hourly Chart
A large scale review of the yellow metal's daily chart has been conducted. Zoom out the chart to see more details.In general we have identified three patterns, which represent three various large scale trends. Two of the patterns are junior to the dominant one and have guided the commodity price into the upper trend line of the largest pattern.
The commodity price is set to test and make one attempt after another to pass the upper trend line of the just mentioned pattern near the 1,300.00 mark.
From a fundamental large scale perspective, if the US Federal Reserve slows down their restrictive monetary policy, then the US Dollar would lose value. In that case gold prices will surge above the 1,300 level.
It could occur through a sudden jump caused by a Federal Funds Rate announcement or a press conference hosted by the central bankers.
Daily Chart
Traders short the yellow metal
Traders continued to short the metal on Tuesday, as 60% of open gold positions on the Swiss Foreign Exchange were short.
In the meantime, trader pending orders in the 1000-base point range were no longer set to sell. Namely, on Tuesday 55% of the orders were set to buy.
During the recent volatility traders remained firmly short on the metal. However, the close by existence of the buy orders indicates that stop losses and take profits for the short positions are close by.