Gold has reversed Thursday’s dip to the breakout point on the upper border of the bullish pennant and has edged higher for the 3rd day in a row, albeit in tentative fashion. In the last hour, gold has touched the $1430 horizontal resistance, which corresponds to the R1 daily pivot, but has failed to push higher.
There appears to be a lot of uncommitted interest on XAUUSD and rightly so, with key economic data from the US lying ahead. Tomorrow, the US Federal Reserve will make a key decision on interest rates, and Friday will see the release of the July NFP figures.
We can expect gold to wake up from its slumber and experience some volatilty, starting with tomorrow’s FOMC event.
Possible Trade Setups on XAUUSD
What is playing out right now is the calm before the storm. Any decision from the FOMC that is seen as dollar negative will send gold soaring past the 1430 horizontal resistance, which will fulfill the expectations of gold bulls who are desirous of seeing the completion of the bull pennant all the way to price levels around 1500 – 1520. However, pitstops will exit at the 1445 horizontal resistance en-route to these expected multi-year top.
Alternatively, dollar positive news from the FOMC will lead to subsequent weakness below the $1422 area, and this might negate any bullish bias from the pennant pattern. This will return prices possibly to the 1380 support area on the back of follow-through selling. We can then expect XAUUSD to experience pitstops at the 1400 psychological level on its way downwards.