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XAU/USD: what’s the pattern?
Information is not investment advice
XAU/USD soared in June but didn’t manage to get above 1,440. During the past three weeks, the price of gold consolidated between that level o the upside and 1,380 on the downside. Although the asset looked overbought, the weakness of the USD kept the price near the highs, so short positions turned out to be premature. Now, however, the price action looks very much like the “diamond” pattern that tends to precede a reversal. Still, to trade on it we would need a confirmation: a decline at least below 1,404. The initial targets will be at 1,390 and 1,371. This scenario looks like the path of least resistance technically.
However, there’s a substantial fundamental chance that the policy of the Fed will keep the USD under pressure. In this case, XAU/USD could strengthen. The price would be able to at least retest the 1,435 area if it rises above 1,425.
In the middle of September 2022, the Canadian dollar has fallen to a 2-year low against the USD.
The US dollar index has all chances of reaching the 2000s high of 120.00.
Many investors treated gold as a protection against inflation. However, last week, gold lost its major support and dropped despite rising inflation. Why did it act like this?