News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bearish
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
More View more
Real Time News
  • The US Dollar has spent much of October giving back September’s gains. Is there any hope for change? Get your #currencies update from @JStanleyFX here: https://t.co/3EHa6PV5yH https://t.co/PrP9J2klJk
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/UalZ8cRSXB https://t.co/wDVd2QvcjO
  • The longer-term EUR/USD outlook will hinge on Thursday’s ECB guidance; any hint of a further easing of Eurozone monetary policy would weaken it, but that is far from guaranteed. Get your #currencies update from @MartinSEssex here: https://t.co/RmHCfIwdqp https://t.co/hvETa6mtft
  • Traders tend to overcomplicate things when they’re starting out in the forex market. This fact is unfortunate but undeniably true. Simplify your trading strategy with these four indicators here:https://t.co/A4dqGMPylo https://t.co/M8WTvZgx2K
  • The Australian Dollar was under selling pressure this past week, but it held its ground. Bearish patterns brew in AUD/USD and AUD/JPY. Will EUR/AUD, GBP/AUD try to break higher again? Get your #currencies update from @ddubrovskyFX here: https://t.co/04kzJSqgNG https://t.co/ulPk1UneMM
  • Stocks are set to endure a string of data releases with market-moving potential in the week ahead in the form of tech earnings, European GDP and more, even as the US Presidential election clamors for the spotlight. #equities update from @PeterHanksFX here https://t.co/R6tpEvfXJb https://t.co/7koHTyh2AK
  • As we round our way towards a new week, Cable is within the confines of a bullish structure with beginnings back in September. Get your #currencies update from @PaulRobinsonFX here: https://t.co/NIbRTVmjqq https://t.co/zYma4Iq4dP
  • Myth or fact? One thing is for sure, there are a lot of misconceptions about trading. Knowing the difference between common trading myths and the reality is essential to long-term success. Find out about these 'myths' here: https://t.co/UGhbX6kn3H https://t.co/NE2RB1NT55
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/MVwUUltt6R
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/38gTDn8ejP https://t.co/XnQzHlFsAv
Gold Price Forecast: RSI to Indicate Waning Bearish Momentum

Gold Price Forecast: RSI to Indicate Waning Bearish Momentum

2020-10-02 00:50:00
David Song, Strategist
Share:

Gold Price Talking Points

The price of gold exhibits an inverse relationship with the US Dollar as the rebound from the September low ($1849) largely coincides with the recent weakness in the Greenback, and the Relative Strength Index (RSI) may show the bearish momentum abating as the indicator appears to be track to threaten the downward trend established in August.

Advertisement

Gold Price Forecast: RSI to Indicate Waning Bearish Momentum

The price of gold has snapped the bullish behavior from earlier this year as it trades below the 50-Day SMA ($1945) for the first time since June, and it seems as though the precious metal will no longer trade to fresh yearly highs during every month in 2020 as the break of the August low ($1863) indicates a potential shift in investor confidence.

Image of Federal Reserve balance sheet

At the same time, the update to the Federal Reserve’s balance sheet appears to be weighing on gold prices as it narrows to $7.056 trillion from $7.093 trillion in the week of September 23, and the wait-and-see approach for monetary policy may drag on investor confidence as the central bank relies on its current tools to support the US economy.

In turn, waning speculation for additional monetary support may drag on bullion as theSummary of Economic Projections (SEP) show the longer run interest rate forecast unchanged from the June meeting, and swings in risk appetite may continue to influence the price of gold as the rebound in the precious metal broadly tracks the pullback in the Greenback.

It remains to be seen if the correction from the record high ($2075) will turn out to be a material change in market behavior or an exhaustion of the bullish trend as the Federal Open Market Committee (FOMC) vows to “increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace,” but key market trends may persist ahead of the next interest rate decision on November 5 as Chairman Jerome Powell and Co. remain “committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible.”

As a result, the low interest rate environment along with the ballooning central bank balance sheets may continue to heighten the appeal of gold as an alternative to fiat-currencies, and key market trends may persist throughout the remainder of the year as the net-long US Dollar bias carries into October.

Image of IG Client Sentiment

The IG Client Sentiment report shows retail traders are still net-long USD/CHF, USD/CAD and USD/JPY, while the crowd is net-short GBP/USD, AUD/USD, NZD/USD and EUR/USD. The tilt in retail sentiment remains even though the FOMC continues to endorse a dovish forward guidance for monetary, and the crowding behavior in the US Dollar may keep the price gold afloat as the Fed plans to “achieve inflation that averages 2 percent over time.

With that said, a move back above the 50-Day SMA ($1945) may instill a constructive outlook for gold as the moving average continues to track the positive slope from earlier this year, and the Relative Strength Index (RSI) may show the bearish momentum abating as the indicator appears to be track to threaten the downward trend established in August.

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by David Song
Learn More About the IG Client Sentiment Report
Get My Guide

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

Gold Price Daily Chart

Image of gold price daily chart

Source: Trading View

  • The price of gold pushed to fresh yearly highs throughout the first half 2020, with the bullish price action also taking shape in August as precious metal tagged a new yearly high ($2075).
  • The price of gold cleared the previous record high recorded in September 2011 ($1921) even though the Relative Strength Index (RSI) failed to retain the upward from June, but the indicator registered a new extreme reading (88) for 2020 as the oscillator pushed into overbought territory for the third time this year.
  • However, the bullish behavior has failed to materialize in September as the price of gold trades below the 50-Day SMA ($1945) for the first time since June, with recent developments in the RSI negating the wedge/triangle formation established in August as the indicator sits at its lowest level since March.
  • Nevertheless, lack of momentum to break/close below the Fibonacci overlap around $1847 (100% expansion) to $1857 (61.8% expansion) has pushed the price of gold back towards the $1907 (100% expansion) to $1920 (161.8% expansion) region, with the RSI highlighting a similar dynamic as it reverses course ahead of oversold territory.
  • Will keep a close eye on the RSI as it approaches trendline resistance, and the indicator may show the bearish momentum abating if the oscillator breaks out of the downward trend carried over from August.
  • Need a break/close above the $1907 (100% expansion) to $1920 (161.8% expansion) region to bring the $1956 (23.6% expansion) area on the radar, with the next region of interest coming in around $1971 (100% expansion) to $1985 (261.8% expansion).
Traits of Successful Traders
Traits of Successful Traders
Recommended by David Song
Traits of Successful Traders
Get My Guide

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES