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Fundamentals

During Thursday's (July 20th) Asian session, Spot gold descended narrowly, and it is currently trading near 1984. Last night's announcement of the U.S. real estate starts data is not satisfying, dragging down the USD slightly, while the gold price surged again to reach 1987 and break the week's high. Now, the market believes that the overall economic environment of the United States is still acceptable, there is no new bank default or defaults on related debt as expected, inflation turns lower gradually, and there isn't any significant downturn in the economy. All the information confirms a soft landing, while the recent data verifies that the Fed interest rate hikes will end soon, and gold prices will be affected. Thus, the short-term gold price will be affected until the Fed rate decision starts next week, and this is the main trading logic. Currently, the market expected that the Fed will terminate the rate hike cycle after the final rate hike by 25 bps on July 26th, and the same rate hike is expected to be raised by the ECB. Traders should keep an eye on the weekly jobless claims data to be announced this evening.  

Data: U.S. June building permits came in at an annual rate of 1.44 million units, lower than the expected value of 1.49 million and the previous value of 1.496 million. Meanwhile, the U.S. June housing starts annual rate was 1.434 million, lower than the expected value of 1.48 and the previous value of 1.631. In addition, U.S. EIA gasoline inventories change was -1.066 million barrels until the week ending July 14th, higher than the expected value of -157.7 million but lower than the previous value of -0.3 million. Data is worse than expected.

Today's focus: The initial jobless claims for the week ending July 15th, the continuous jobless claims for the week ending July 8th, the U.S. existing home sales seasonally adjusted annual rate for June and the Eurozone's consumer confidence indicator for July.  

Technical Analysis

Daily chart: Gold dropped on Wednesday as expected from 1981 to 1970 by 11 dollars. It failed to release the positions continuously during the second wave of decline in the U.S. session. Therefore, the gold bulls dominate, and the daily chart closed above 1978, showing a strong pattern currently. Regarding the weekly chart, it did not finish to release the positions at the lows for 3 consecutive growths but kept surging. Thus, there is space above, and it will not reach the top as long as the daily chart closed positively. Besides, the daily chart is running at an ascending channel, and the MACD indicators, as well as the SMAs, suggest a bullish pattern, and the bullish trend will not end shortly. However, after the significant appreciation on Tuesday, gold has technically reached the overbought area with a bearish divergence pattern in the near term, but there isn't a sign of a retracement. Even the USD rebounds, there was no retracement in XAUUSD, but continuous oscillations. As the demand for retracement is accumulated technically, traders need to be cautious of gold prices and stop chasing the ascending trend. Instead, it is better to go long after retracements.

Trading recommendations: As was mentioned yesterday, traders should go short with small positions at 1980 shortly, and refer to 1970 to take profits. According to the pattern, the profits were realized. Today, if the gold price is getting boosted continuously, try to refer to the range of 1995-2000 as resistance, and trade it with short positions. The support below will be in 1963-1973, and traders should go long if gold plunges to this area.

Trading Recommendations

Trading direction: Short

Entry price: 2000

Target price: 1970

Stop loss: 2005

Support: 1980.000/1970.000

Resistance: 2000.000/2010.000