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. See our updated Privacy Policy here.

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
Subscribe
Please try again
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
More View more
Real Time News
  • Recessions can devastate the economy and disrupt the fortunes of individuals, businesses, and investors. But economic decline in the business cycle is inevitable, and your trading can be defined by how you respond to crisis. learn how to prepare here: https://t.co/e4CnobJCss https://t.co/9t94CbyQEi
  • The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. Find out about the recent history of ISM data, how to track it, and how to trade its release here: https://t.co/MZtBh88nOv https://t.co/LB749nN0K4
  • The continuity seen across these volatility cycles is a good thing. Historical precedence offer a blueprint for identifying conditions supportive for a vol-event to occur, and how they may unfold. Deepen your knowledge of historical volatility here: https://t.co/vg7w10la3j https://t.co/7JZu61F0OW
  • Tech stocks pulled back from record territory after Amazon posted tepid Q3 guidance. Get your weekly equities forecast from @margaretyjy here: https://t.co/kpYlD2ryue https://t.co/pXDztqY8PQ
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/LQS1xMPSVc
  • When it comes to buying and selling forex, traders have unique styles and approaches. Learn about buying and selling forex here: https://t.co/D8DXSAdpqC https://t.co/WmRkOUGwlq
  • Recent price action in the US Dollar Index (DXY) casts a bearish outlook for the Greenback as it extends the series of lower highs and lows from earlier this week. Get your weekly USD technical forecast from @DavidJSong here: https://t.co/aQVzoACWEp https://t.co/TBFiTrur0P
  • USD/MXN drops back into its recent range as investors await further guidance from economic data. Get your weekly Mexican Peso forecast from @HathornSabin here: https://t.co/reMgPrFGdF https://t.co/dl6gomcFxF
  • Slippage can be a common occurrence in forex trading but is often misunderstood. Understanding how forex slippage occurs can enable a trader to minimize negative slippage, while potentially maximizing positive slippage. Learn about FX slippage here: https://t.co/Blrl0uF2Ct https://t.co/KS13JNwlvL
  • What is your forex trading style? Take the quiz and find out: https://t.co/YY3ePTpzSI https://t.co/bxQ8s8eGjR
Gold Price Rally Pushes RSI Into Overbought Territory

Gold Price Rally Pushes RSI Into Overbought Territory

David Song, Strategist

Gold Price Talking Points

The price of gold attempts to retrace the decline following the Federal Open Market Committee (FOMC) Minutes as the 10-Year US Treasury yield falls back towards the 50-Day SMA (1.63%), and recent developments in the Relative Strength Index (RSI) indicates higher gold prices as the oscillator flirts with overbought territory.

Advertisement

Gold Price Rally Pushes RSI Into Overbought Territory

The price of gold has cleared the February high ($1872) after pushing back above the 200-Day SMA ($1844), and precious metal may approach the yearly high ($1959) as a growing number of Federal Reserve officials warn of a transitory rise in inflation.

However, the minutes from the April meeting revealed a growing discussion within the FOMC to scale back the emergency measures as “a number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

In turn, the FOMC may gradually change its tone over the coming as “continued progress on vaccinations and accommodative monetary and fiscal policies most likely would underpin further gains in economic activity,” and it remains to be seen if the central bank will adjust the forward guidance at its next interest rate decision on June 16 as Fed officials are slated to update the Summary of Economic Projections (SEP).

Until then, the dovish forward guidance may keep the price of gold afloat as “participants agreed that the economy was still far from the Committee's longer-run goals,” but speculation for a looming change in Fed policy may underpin the rise in longer-dated US Treasury yields as “participants assessed that risks to the outlook were no longer as elevated as in previous months.

In turn, the decline from record high ($2075) may underscore a change intrend as the price of gold broadly reflects an inverse relationship with US yields, but the precious metal managed to establish a double bottom formation in March, with the key reversal pushing the precious metal above the 200-Day SMA ($1844) for the first time since February.

With that said, the price of gold may attempt to test the yearly high ($1959) as the Relative Strength Index (RSI) pushes into overbought territory, and the move above 70 in the indicator is likely to be accompanied by higher gold prices like the behavior seen in July 2020.

Gold Price Daily Chart

Image of Gold price daily chart

Source: Trading View

  • Keep in mind, 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 the precious metal tagged a new record high ($2075).
  • However, the bullish behavior failed to materialize in September as the price of gold traded below the 50-Day SMA ($1770) for the first time since June, with developments in the Relative Strength Index (RSI) negating the wedge/triangle formation established in August as the oscillator slipped to its lowest level since March.
  • Nevertheless, a double-bottom emerged in 2021 as the price of gold failed to test the June 2020 low ($1671), with the key reversal pattern pushing the precious metal back above the 200-Day SMA ($1844) for the first time since February. $1857 (61.8% expansion).
  • The price of gold may continue to retrace the decline from the yearly high ($1959) as the RSI pushes into overbought territory, with the move above 70 in the indicator likely to be accompanied by higher gold prices like the behavior seen in July 2020.
  • The break above the $1857 (61.8% expansion) region brings the Fibonacci overlap around $1907 (78.6% expansion) to $1929 (23.6% expansion) on the radar, with move above the yearly high ($1959) opening up the $1971 (100% expansion) to $1985 (261.8% expansion) area.

--- 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