XAUEUR: Forex GOLD/EURO Analysis – ECB will continue loose monetary policy

By IFCMarkets

ECB will continue loose monetary policy

In this review, we will consider the trading instrument gold against the euro. Will XAUEUR prices rise? An upward movement occurs when gold prices rise, and the euro weakens.

According to the results of the next ECB meeting on July 26, 2018, Mario Draghi said that the ECB will continue the ultra-loose monetary policy, despite the fact that inflation in the Eurozone approaches the 2% target level. The rate hike from the current zero level is possible not earlier than the summer of 2019. At the same time, the ECB will continue to issue euros in the amount of 2.6 trillion euros per year with the aim of the EU economy monetary stimulation (quantitative easing). Such measures may prevent long-term strengthening of the single currency. In turn, the demand for gold may increase, as, amid risks of trade wars, many countries increase the share of precious metals in their international reserves. Last week, US President Donald Trump criticized the policy of the Fed rate hike, which is also a positive factor for gold.

On the daily timeframe, XAUEUR: D1 approached the resistance line of the downtrend. It should be overcome before opening a buy position. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of an increase in global demand and negative economic data in the Eurozone.

• The Parabolic indicator gives a bullish signal.
• The Bollinger bands have widened, which indicates high volatility.
• The RSI indicator is below 50. It has formed a positive divergence.
• The MACD indicator gives a bullish signal.

The bullish momentum may develop in case XAUEUR exceeds its last fractal high at 1055. This level may serve as an entry point. The initial stop loss may be placed below the last fractal low, the low since February 2016 and the Parabolic signal at 1042. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (1042) without reaching the order (1055), we recommend to close the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets