General analysis XAUUSD for 26.05.2022
Current Dynamics
Due to local strengthening of the US dollar, the pair XAUUSD continues its decrease from the local maximum for the last two weeks and fluctuates at the level of 1850.00. Possible driver for growth of pair in the nearest future - widespread fears of traders about possible recession in the world market, including the USA. Appetite for risk continues to decline gradually, if in a place of it the position of the US dollar will continue to weaken, then XAUUSD as an alternative asset - a shelter has all chances to grow.
Precious metals are traditional reserve assets, reflecting an inverse correlation with stock index quotes. At the same time, for the last several months, such correlation is not evident, and the situation looks rather unusual and ambiguous, for yields of treasuries and the cost of precious metals in the U.S. stock market indexes go down at the same time.
The decline of stock markets, weakening of macroeconomic indicators of the world economy, and publication of May FOMC meeting notes, which reflected the solidarity of the majority of members of the committee in their opinion about the need to raise the key rate by 50 bps during the next two summer sessions, naturally led to increased demand for the US dollar as a safe haven currency.
At the same time, escalation of global geopolitical tensions, the prolonged nature of the armed conflict in Ukraine, tensions around the situation with Taiwan, rising inflation, resulting in progressive key rate hikes by major central banks, all factors, indicate serious risks of a global economic recession. Possible pause in tightening of the FRS monetary policy, fall of profitability of the US Treasury bonds leads to gradual weakening of greenback positions and influences investors moods, limiting the bullish sentiment against the US dollar. All the above circumstances are positive drivers for investment in gold as an alternative reserve asset.
The news releases due today that could have a significant impact on the XAUUSD pair’s future are preliminary Q1 GDP data, initial jobless claims and April Pending Home Sales Index (m/m).
Support and resistance levels
Alligator is about to go to sleep: the moving averages are twisted, the instrument is flat. The nearest fractal below the alligator’s teeth (red line) is at 1842.30. Awesome Oscillator (AO) and Accelerator Oscillator (AC) are both in the red area, which is a confirmatory sell signal.
- Support levels: 1811.30, 1831.80, 1842.30
- Resistance levels: 1852.30, 1858.50, 1869.30
Trading scenarios
- Long positions can be opened above the level of 1852.30, with a target of 1858.50and stop loss of 1847.00. Implementation period: 2-4 days
- Short positions can be opened below the level of 1811.30, with a target of 1831.80 and stop-loss of 1847.00. Implementation period: 2-4 days