Gold Elliott wave analysis: bullish trend slows down ahead of FOMC

Gold recovers to 1355 after Monday’s dip but has now dropped to 1340. Ahead of the FOMC, the following looks at the most likely scenarios based on the Elliott wave theory.

June 19, 2019 | AtoZ Markets – The yellow commodity has been on a bullish run since late May. It hit 1358 last week to mark its highest price since the second quarter of 2018. The commodity is close to a technical resistance zone and it remains to be seen whether it will break upside toward 1400 or retreat below 1300. The FOMC is the biggest fundamental event this week. One of these two options will most probably happen based on the outcomes of today’s Fed’s decision.

Gold analysis: FOMC preview

Policy makers in the major central banks are taking cautious efforts toward the current perceived global economic slow-down. In its ongoing summit, the ECB took a dovish shift to its rates decision. The bank’s president Draghi announced on Tuesday that the Bank will take measures to stabilize the economy if inflation does not improve. One of the tools considered is the rate cuts. 

Today, Fed chair Powell is expected to walk the same path when the FOMC announce their decisions. The market expects a rate cut. However, there is still room for surprises. Considering that recent data from the US have been good, the Fed could wait a bit longer before deciding on rate cuts. 

Gold is heavily dollar-denominated. The effect of the Fed’s decision today is expected to have a similar impact on the non-yielding metal. If the Fed is hawkish with the rate unchanged, Gold is expected to drop toward 1300 and 1265. On the other hand, if the tone is dovish with rate cuts, Gold should soar above 1360 toward 1400. There could also be a mixed outcome which is usually followed by a much smaller reaction from the price.

Gold Elliott wave analysis

In the last update, we identified a long term triangle wave pattern that started mid-2016. If the pattern would hold, a dip to 1260 was expected to complete a double top reversal pattern at 1348. However, the bulls pushed above 1348 to invalidate the possibility of a double top pattern. The following is the new medium-term forecast.

A bullish impulse wave from 1266 is emerging on the hourly chart. The current dip looks like the 4th wave and could continue to 1324 or 1314 (if deep) before the bulls push further for the 5th wave to the 1370-1380 resistance zone. The FOMC is an important factor and price might move farther and faster than expected – surge above the resistance zone or drop below 1300 to 1266. 

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