Gold dropped to 1400 after the hawkish Fed. The following technical insight is based on the Elliott wave theory.
August 01, 2019 | AtoZ Markets - The price of the yellow metal plummeted on Wednesday after the FOMC meeting which ended with a hawkish tone and the rate was cut for the first time since December 2008. The market expected a rate cut of this amount but it reacted to the Fed chair's statements which showed that all is well with the US economy. The rate cut was more of a proactive measure than a reactive one. In the end, the greenback spiked. Gold price activities in 2019 are quite different from the major currencies'. The metal has attracted massive demand since December 2016 and gained nearly 30% when it hit 1452 earlier this month.
After its decline to 1400 earlier today, Gold is recovering gradually ahead of Friday's US employment data. The market expects a job increase of 170k in July. Gold is close to making a bearish correction toward 1350. Whether the move has started or a rally to 1460 will happen before it does, remains to be seen. To the downside, 1400 remains the closest most critical support level. A break below 1400 might trigger further fall below the 1375-1368 support zone. To the upside, on the other hand, 1434 and 1452 remain the most critical resistance levels. A break above these levels could lead to 1460.
Gold Elliott wave analysis
The commodity is about completing a bullish impulse wave from 1160. At least a 3-wave bearish correction is expected far below 1400. In the last update, we looked at two scenarios. While one agrees that the impulse wave has ended at 1452, the other expected further rally to 1460 to complete the pattern with an ending diagonal/wedge pattern. The chart below was used for the first scenario.
A break below 1412 happened as expected but 1400 supported a bounce. The current recovery might continue to 1420. If price returns to break below 1412, then a fast dip below 1400 will happen.
On the other hand, if 1400 continues to stand, a rally above 1440 will trigger the 2nd scenario shown in the chart above.