Following the Emergence of the Pin-Bar Pattern, the Rebound of Gold Prices Has Peaked

Eva Chen

Commodity

Central Bank

Economic

Summary:

As the price of gold continues to fall significantly from its annual high of US$ 2009, breaking a series of recent highs and lows, forming a pin-bar pattern within the 1D timeframe, and completing the testing of the supply zone, the gold prices may face a more significant pullback.

SELL XAUUSD

Close Time

CLOSED

1942.80

Entry Price

1760.00

2024.00

4210.26 +12.35 +0.29%

486.2

Pips

Loss

1760.00

1991.42

Exit Price

1942.80

Entry Price

2024.00

Fundamentals

The outcome of the ongoing Federal Reserve FOMC meeting is shrouded in great uncertainty. Nevertheless, the market is well aware of the Fed's dilemma. Policymakers face a difficult choice between fighting inflation and financial stability. Although financial stability has not been explicitly included in the duties of the Federal Reserve, just as the Fed will intervene in the market in the first place after the overnight reverse repurchase in September 2019, the stock market crash in March 2020, and the recent banking liquidity crisis, I believe the Fed will take stabilizing the financial market as the first consideration and actively respond to it this time. Efforts to combat inflation will be somewhat rebuffed.

U.S. federal funds futures show an 82% chance of a 25-basis-point rate hike at the FOMC meeting, although some economists suggest the Fed should suspend its tightening policy. This is a far cry from the widely expected 50-basis-point rate hike before the recent banking turmoil.

The Fed's latest bitmap will reveal the path of future policies, either to maintain the stability of the U.S. financial industry or to win the fight against inflation. If the bitmap points to a higher final interest rate than the 5.1% forecast in December, such forward-looking guidance could trigger another wave of risk aversion and could push the USD higher. Even if today's hard-line 25-basis-point rate hike is met, the Fed's refusal to raise interest rates further at its upcoming meeting could also exacerbate fears that the financial sector will suffer more damage during the transition while exacerbating the risk of a recession.

On the other hand, a (modest) 25-basis-point rate hike, or even a pause in the rate-raising cycle, could indicate that policymakers are worried that the ongoing U.S. banking turmoil will have more impact. It remains to be seen whether assets such as stocks, commodities, and foreign exchange will find more solace in the news conference of U.S. Federal Reserve Chairman Powell, even if he sends a more supportive signal amid the deepening financial instability.

It is obvious that the officials attending the FOMC meeting in March are facing a difficult choice. They must find a delicate balance between safeguarding the central bank's anti-inflation efforts and credibility and boosting the mood around the U.S. banking industry.

Technical Analysis

Recently, the liquidity crisis triggered by the banking industry has prompted investors to seek safety. Funds have flocked to safety assets to push gold prices all the way higher. Gold broke a series of recent highs and lows after bulls failed to test the 2022 high (US$2,071); With the formation of the pin-bar pattern within the 1D timeframe, the completion of testing of the supply zone and the recent development of the Relative Strength Index, gold prices may face a significant pullback.

XAUUSD: Following the Emergence of the Pin-Bar Pattern, the Rebound of Gold Prices Has Peaked_1

The pin-bar pattern is distinguished by three candlesticks as pattern combinations. In the bearish pin-bar reversal configuration setting, the tail of the pin bar points upward because it indicates a rejection of a higher price or resistance level. This setting usually results in a price drop. If the pattern occurs in a larger cycle, such as the current 1D spatial framework, it may trigger a deeper price reversal signal.

XAUUSD: Following the Emergence of the Pin-Bar Pattern, the Rebound of Gold Prices Has Peaked_2

On the other hand, the sharp pullback in prices since Monday's price test of the early supply zone means the rally in prices from US$1,804 has been completed. If the price is further tested to a new high, this means that there are still outstanding order tests within a wider range of prices; On the contrary, it means that this round of sharp price rebound has peaked.

The discovery of the latest trend of the gold price was found in the bearish pin-bar formed by the failure to get an effective rebound after falling below US$1,955 yesterday. Combined with the recent series of overbought signals, we changed our view of yesterday's continued bullish trend. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 1941

Target price: 1760

Stop loss: 2024

Deadline: 2023-04-05 23:55:00

Support: 1935, 1920, 1900, 1890

Resistance: 1955, 1986, 2009, 2016

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