XAUUSD Hits 3 Months High On Poor US Economic Data

XAUUSD which is the symbol for Gold hit 3 months high on poor US economic data. Gold and USD are inversly correlated meaning when the US Dollar gets weak, gold gets strong and when US Dollar gets strong, gold gets weak. Gold hit three-month highs on Monday, rising for a fifth session, as a run of soft U.S. data supported expectations that the Federal Reserve will hold off raising interest rates for the time being.

That took some pressure off gold. An increase in rates would raise the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

For now this rally seems to be over as XAUUSD H4 chart is showing bearish divergence. Take a look at the following screenshot.

XAUUSD H4 Chart

But we believe that this bearish divergence is just a signal for a retrracement.  The aqua line which is EMA 55 will act as a solid line of support in this case. Price will most probably fall and then bounce up after touching the aqua line which we also call the fast line.

Now many people love to trade gold but they should know that liquidity in the gold interbank market is pretty poor now. So if you are trading small positions, it is no problem but if you want to trade hugh volume in gold than you might find it difficult to get your trade executed.

For now everything depends on the FED. With poor US economic data, FED is most likely not going to increase the interest rate this year. This means gold can rally once again this year.

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