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Bearish Formation Raises Risk for Lower Gold Prices

Bearish Formation Raises Risk for Lower Gold Prices

Talking Points:

- Gold (XAU/USD) Eyes September Low ($1,099) as Bearish Formation Continues.

- NZD/USD Struggles to Hold Support Ahead of New Zealand 3Q Employment Report.

- USDOLLAR Mounts Larger Rebound Ahead of ADP, ISM Survey- Fed Rhetoric in Focus.

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Chart - Created Using FXCM Marketscope 2.0

  • XAU/USD extends the sell-off following the Federal Reserve interest rate decision, with the precious metal at risk for further decline amid the ongoing series of lower highs & lows in price, while the Relative Strength Index (RSI) fails to preserve the bullish formation from July.
  • As gold and silver prices continue to move in tandem, it seems as though market participants are treating the yellow metal more as a currency than a commodity amid the disinflationary environment across the major industrialized economies accompanied by rising rate expectations in the U.S.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd is currently net-long XAU/USD, but it seem as though FX traders are attempting to fade the near-term decline in gold as the ratio climbs to +1.46, with 59% of traders long.


NZD/USD Daily Chart
  • NZD/USD may continue to give back the advance from September as it struggles to hold above near-term support around 0.6690 (61.8% expansion) to 0.6710 (50% retracement); a closing price below the Fibonacci overlap paired with a failure to retain the bullish RSI formation from July may spur a resumption of the long-term bearish trend as the Reserve Bank of New Zealand (RBNZ) keeps the door open to further embark on its easing cycle.
  • New Zealand’s Employment report is expected to show a 0.4% expansion accompanied by an uptick in the Unemployment rate, but a pickup in the Participation Rate may dampen the RBNZ’s scope to implement lower borrowing-costs as it remains near record-highs.
  • Following the failed attempt to break above 0.6890 (50% expansion) to 0.6900 (100% expansion), will keep a close eye on the downside targets, with the next key region of interest coming in around 0.6370 (50% retracement) to 0.6400 (61.8% retracement).

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Read More:

Price & Time: We Should Learn A Lot About Gold This Week

EUR/USD, EUR/AUD Breakdowns Resuming alongside EUR/GBP

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12043.2112068.5112013.680.03111.87%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though the U.S. data prints continue to highlight a mixed outlook for the world’s largest economy, Dow Jones-FXCM U.S. Dollar appears to be carving a bullish ‘outside-day’ ahead of the slew of Fed speeches on tap over the next 24-hours of trade amid growing speculation for a December liftoff.
  • However, as the central bank remains ‘data-dependent,’ will keep a close eye on the ADP Employment report along with the employment component for the ISM Non-Manufacturing survey to better-gauge market expectations for the highly anticipated Non-Farm Payrolls (NFP) report.
  • Despite the near-term rebound, dovish comments from the Fed along with another batch of mixed data prints may open up the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) as the RSI remains capped by the bearish formation carried over from May.

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--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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