Chart of the week – Gold (cash) fell to test key medium-term support area
VSheart of the week – Gold (cash)
Gold (cash) fell to test key medium-term support zone
Short term technical analysisclick to enlarge the graph
Time stamp: June 20, 2021 at 5:00 p.m. SGT
Source: CMC Markets
- The recent decline in gold (cash) from a 5-month high of 1.916 printed on June 1 was reinforced by the surprise hawkish projection of future interest rate hikes, as shown by the latest dot plot of the US central bank released June 16. , FOMC where a growing number of Fed officials have advanced the first interest rate hike to 2023 from 2024 and several officials are even arguing for two hikes before the end of 2023.
- Gold (cash) has fallen -5.16 for two consecutive sessions since the Fed’s last FOMC announcement on June 16 at 2:00 p.m. GMT to print a low of 1,761 on Friday June 18. 1750/1723 forward pivot support zone which is defined by the former resistance of the “Double Bottom” neckline formed from March 9, 2021 to March 31, 2021 and close to the 61.8% Fibonacci retracement / 76.4% of the previous 8 weeks of uptrend from March 31, 2021 minimum to June 1, 2021 maximum.
- The 4-hour Bollinger bandwidth (a measure of the relative volatility of the price action) hit its 6-month high of 0.07 coupled with the 4-hour Relative Strength Index (RSI) that reached an extreme oversold level of 17%. These observations suggest that the current decline is overstated where the odds of an average recovery / reversion have increased at this point.
- If the key medium term support at 1723 holds, gold (cash) could rebound towards intermediate resistances at 1800 and 1852. However, a 4 hour close below 1723 invalidates the short term bullish bias for the continuation of the cascade fall to retest the major support at 1676 on March 31, 2021.