As you know we have been tracking gold for a long trade set-up, and it appears as though the time is right. The FED interest rate meeting and economic projections are due later this week. As the stock market is under pressure we see the FED stepping in to support the financial markets as the most likely scenario. Inflation has missed expectations for the second month in a row which is playing into the FED’s transitory theory. There is a possibility they push back bond tapering whilst they assess the current risks in the financial markets (Covid and China). Therefore this could provide the market something to cheer about and send the DXY lower, resulting in higher gold prices. Kicking the can down the road is the most suitable term.
DXY Daily Chart
Initially, the DXY appeared to be moving towards the 93.70 resistance, but this didn’t occur. Therefore there is still a possibility of the DXY breaking down from the head and shoulders structure.
GOLD – Monthly Chart
Gold’s monthly chart has a very bullish structure. There is a major pin bar at the 1680 support zone. This indicates there was a large amount of buying volume coming into the market at support.
GOLD – Daily Chart
There is a clear inverted head and shoulders setting up on gold. Entry wise, it doesn’t get much better than this for a great risk v reward. IF the inverted head and shoulders formation is in play, it would indicate a breakout above the neckline at 1830 and a new bullish trend. There is a negative trendline resistance coming into play at 1830-1840, so we expect some kind of reaction around this level.
GOLD – 4 Hour Chart
Trade Setup: BUY market execution, current price 1764, stop loss 1740 and take profit target 1 = 1830 and target 2 = 1930.
Stop loss: 240 pips
Take profit: 660 – 1660 pips
The second take profit is obviously a long distance away, and this would need a deep decline on the DXY to take place. Once we start to see some upside coming into play we will look to build into this position further.