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Gold to Pave Larger Rebound- AUD/USD Bullish Setup at Risk

Gold to Pave Larger Rebound- AUD/USD Bullish Setup at Risk

David Song,

Talking Points:

- XAU/USD Risks Larger Rebound as Bullish RSI Formation Takes Shape.

- AUD/USD Threatens Bullish Setup Ahead of Australia Trade Balance Report.

- USDOLLAR Fails to Test 2015 High (12,219) as Mixed U.S. Data Persists.

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XAU/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The near-term rebound in XAU/USD may gather pace as Gold clears the December high ($1,089), while the Relative Strength Index (RSI) carves a bullish trend; will keep a close eye on former support around $1,102 (38.2% retracement) to $1,103 (78.6% expansion) for new resistance.
  • May see increased demand for Gold should the risk adverse market ultimately turn into a flight to quality but, the long-term outlook remains bearish as the precious metal continues to carve a long-term series of lower highs & lows.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long XAU/USD since December but, the ratio has come off of recent extremes as it narrows to +1.47, with 59% of traders now long.


AUD/USD Daily Chart
  • AUD/USD stands at risk of facing a further decline as the RSI fails to retail the bullish formation from September, while price looks to follow suit as the pair it threatens the upward trend from the same period.
  • With Australia’s Trade Balance report anticipated to show a narrowing deficit in November, a marked improvement may spur a near-term bounce in the exchange rate but, the pair may continue to give back the rebound from the 2015 low (0.6906) especially as the Reserve Bank of Australia (RBA) keeps the door open to further embark on its easing cycle.
  • Close below 0.7080 (38.2% expansion) to 0.7090 (78.6% retracement) may open up the next downside target around 0.7000 handle (78.6% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12207.8912210.7112171.140.2394.92%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though market participants are looking for another 200K expansion in U.S. Non-Farm Payrolls (NFP), the failed attempt to test the November high (12,219) may generate range-bound prices in the USDOLLAR amid the ongoing batch of mixed data prints coming out of the U.S. economy
  • Recent remarks from Fed Vice-Chair Stanley Fischer suggest that the 2016 FOMC will implement higher interests rates over the coming months as central bank officials continue to see ‘transitory’ factors dragging on price growth and see the region approaching the 2% inflation target over the policy horizon.
  • Waiting for a break of the near-term range to open the door for a move at the next topside targets around 12,273 (161.8% expansion) to 12,296 (100% expansion).

Read More:

NZD/JPY Testing Support- Outlook Remains Bearish Sub-81.40

Price & Time: EURUSD - Still In No Man’s Land

Bearish NZDUSD As Double-Topping Pattern Develops on Divergence Into 200-DMA

Trading Opportunities of 2016: Key Currency Crosses to Watch amid the Diverging Paths for Monetary Policy

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

--- Written by David Song, Currency Analyst

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

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