Gold is once again trading near its lowest levels in a month, but bulls are seeking hope in the recent rebound that occurred on Friday and was preceded by a small doji candlestick. Gold recovered from initial declines on Friday and gained significantly by the end of the day as US jobs data came in mixed and EURUSD rebounded.
Friday's candlestick could potentially mark a local low and also the right shoulder of an inverse head and shoulders pattern. Today, we are witnessing a pullback in gold, which puts the fate of the right shoulder at stake.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appAs seen in recent months, there is a significant correlation between gold and EURUSD. Having said that, rebound in EURUSD could be the best scenario for gold bulls. In theory, it may happen this Thursday when US CPI data for July is released at 1:30 pm BST. Market expects headline US CPI inflation to accelerate from 3.0 to 3.3% YoY, with a monthly increase of 0.2% MoM.
Neckline of the inverse head and shoulders pattern on GOLD can be found in the $1,980 area. Should we see price rise and break above this hurdle, it could pave the way for a larger upward move with a textbook range of the breakout from the pattern being $2,066 per ounce. Source: xStation5
US CPI is expected to increase 0.2% MoM in July, what would be in-line with historical average. In such a scenario, headline CPI would rebound to 3.3% YoY on an annual basis. Should inflation also increase 0.2% MoM in the following months, the next local high in CPI may be reached in January. Source: Bloomberg Finance LP, XTB Research
