Expectations of a $1.9 trillion stimulus package likely to be passed in the US Congress keep the reflation trades alive and kicking, fuelling gold’s (XAU/USD) rally towards the critical $1850 level. The yellow metal prepping up for a big break higher, technicals suggest, according to FXStreet’s Dhwani Mehta.
“Gold prices could likely benefit if the Treasury yields resume the recent declines amid uncertainty over the strength of the US economic recovery. The US CPI data and the Fed Chairman Jerome Powell’s take on the economy will be critical to the next direction in the metal.”
“The potential inverse head-and-shoulders neckline at $1850 needs to be scaled on a sustained basis for the big technical breakout, which would expose the February highs near the $1863 region. The next stop for the bulls is seen at $1875, the January 29 high.”
“The 21-SMA at $1840 offers immediate support, below which the confluence of the 50 and 200-HMAs at $1834 could be tested. The horizontal 100-SMA at $1820 could provide strong support to the XAU bulls.”