Chapter 1 XAUUSD: Buy Low and Sell High(5.31)
Fundamentals
During the Asian session on Wednesday (May 31), spot gold fluctuated in a narrow range and is currently trading around 1958. Gold prices retreated as overnight U.S. economic data continued to beat expectations. Currently, the primary concern of the market remains the immediate debt ceiling issue. As the US Treasury Department has clearly drawn a "default limit" on June 5, the time left for the Senate and House of Representatives to vote is only a few days this week. The consensus of the market is the final pass. However, since today is the first time in Congress, a bipartisan consensus may be difficult to reach. As gold prices remain disturbed, there are still opportunities for bulls and bears.
US FHFA house price index was 0.6% m/m in March, higher than expectations of 0.3% and 0.5% previously; The unseasonally adjusted house price index of the 20 major S&P/CS20 cities in the United States in March was -1.1% y/y, higher than the expected value of -1.6% and lower than the previous value of 0.4%; The US Chamber of Commerce Consumer Confidence Index was 102.3 in May, higher than the expected reading of 100 and the previous reading of 101.3; Overall, the US data generally performed well.
Traders can pay attention to the US JOLTs job vacancies in April today, which may provide important clues to whether the US interest rate hike in June.
Overall: The market is focusing on issues of the US debt ceiling and US interest rate hikes recently. On the debt ceiling, the current consensus will eventually dissipate, but the short-term sentimental disturbances will remain. In the short term, gold prices have limited upper-limit space and tend to oscillate. In the medium and long term, however, it will be a positive for gold prices whether the agreement is achieved or not. For one thing, a default will inevitably drive risk aversion. For another, even if it is achieved, the US fiscal will be stretched thin and will follow the same old path of deficit monetization. Coupled with persistent inflation, high-interest rates will last longer. Besides, recession expectations will strengthen and push the dollar to dive deeper. Therefore, the chances of gold reaching another all-time high during the year remain greater. Traders should seize the opportunity to take long positions in every large correction. As the saying goes, small profits depend on technique, and big profits should rely on faith!
The trading reference range today is 1950-1988.
Technical Analysis
Trading at the daily timeframe, gold prices have bounced back after falling to almost two-month lows to gain support, recording a bullish signal similar to "engulfing" with gold back above the MA5 and MA10. The KDJ has formed a golden cross, with increasing short-term bullish signals. Gold prices are expected to reverse the previous decline. Initial resistance is around yesterday's high of 1966 and further strong resistance is around the 38.2% retracement of the 2080-1932 downtrend.
Since the death cross signal of MACD still remains, it is still necessary to be aware of the possible extending decline after the gold price rally is blocked. Initial support below is around the MA5 at 1950, with further support around the nearly two-month low of 1932 and strong support at the March 17 low around 1918. The loss of this position will increase the bearish signal in the future, and the bulls may retreat to the important 1900 mark.
Trading Recommendations
Trading Direction: Long
Entry Price: 1950
Target Price: 1988
Stop Loss: 1918
Support: 1932.000/1918.000
Resistance: 1966.000/1988.000
