Chapter 16  XAUUSD: Focus on Tonight's Data that May Advise the Main Trend(4.27)


Spot gold oscillated upwards during the Asian session on Tuesday (April 25th) and is currently trading near the 2000 integer level. In addition, investors continue to feel upset about the plight of the US First Republic Bank and fear that US economic growth is likely to unexpectedly decline. Meanwhile, US stocks fell to a near-four-week low overnight, providing support to gold prices. The Atlanta Fed's GDPNow shows that US GDP has grown at 1.1% YoY in the first quarter, well below the 2.5% forecast a week ago. This suggests there may be downside risks to the US first quarter GDP data due Thursday. Meanwhile, analysts polled by Reuters expect US GDP to grow 2% YoY in the first quarter. Wells Fargo cut its US GDP growth estimate by 100 basis points to 0.8%. For investors, keeping an eye on tonight's GDP data is significant, which may give a short-term trading thread. If tonight's data is substantially better than expected, gold prices may test the recent low support near 1969, but if it is weaker than expected, there is a high probability of a smooth move above 2015 and an attack on 2032 resistance.

In general, US durable goods orders were fair, US March durable goods orders rose 3.2% YoY, better than the expected 0.7%, and the previous value revised from down 1% to down 1.2%. However, the US M2 money supply fell to -4% YoY in March, the fourth consecutive monthly contraction and the largest YoY decline in history. The US money supply is contracting at the fastest rate since the Great Depression in 1930 and has now entered a society-wide tapering phase. Besides, high interest rates overlaid with low supply will significantly increase the difficulty and cost of accessing funds for weak credit entities. For now, the US economy is still resilient and recessionary pressures are accumulating, along with the possibility of a credit crisis in the residential and corporate sectors. In the long run, these will support gold, but the short-term oscillation pattern remains unchanged. Therefore, waiting for further development of events and keeping buying at lows.

The trading range of today will be 1980-2015.

Technical Analysis

Daily chart: gold has oscillated for nine consecutive trading days between 1969 to 2015 with strong support below regarding buying the dips. Furthermore, the low of the recent 5 trading days has moved up gradually while the high above started to drop, suggesting a narrower oscillation with a triangle pattern emerges. Among these oscillations, enormous momentum has been accumulated, seeking a chance to break through. Presently, KDF forms a golden cross, indicating that gold will probably recover the appreciation, with the initial resistance near 2010, which is the overnight high. Then, the resistance will be near 2015, which is the high of April 17th. If gold breaks through this resistance, further bullish signals will be strengthened. Further resistance should be near 2020 and 2032 (the high of April 5th), and a new ascending channel will be established.  

Nonetheless, MACD extends a death cross signal, with the engulfing pattern at high continuing and overnight gold falling from highs, it is important to be worried about gold plunging under oscillations. Additionally, the initial support will be near today's low of 1990, then, it will be 1980, while the lower support on April 19th is near 1969. If gold plummets below this support, further bearish signals will be stronger. Refer to 1960 and the low on March 27th near 1944 for further support.  

XAUUSD: Focus on Tonight's Data that May Advise the Main Trend(4.27)-Pic no.1

Trading Recommendations

Trading direction: Long

Entry price: 1980

Target price: 1955

Stop loss: 2015

Support: 1981.000/1969.000

Resistance: 2015.000/2032.000

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