Important Upcoming Fundamental Events:
- ECB Interest Rate Decision (March 10, 2016)
- Draghi’s Press Conference (March 10, 2016)
- Fed Meeting (March 15-16, 2016)
XAUUSD and Gold Futures have been trading into a corrective phase from September 2011 until December 2015 – January 2016 when a temporarily bottom formed. The rally continued and the bottom was confirmed when the upward bound of the orange channel was breached.
In the following chart we illustrate a condensed period in the Daily chart for XAUUSD. This period includes the jump the pair made from its low.
As seen from the chart, XAUUSD has completed a 5-wave structure from the low, which completes the bigger wave i.Even though the last wave (circle 5) topped into an important resistance zone, price did not touch the key resistance area highlighted in the box.
Under this scenario, XAUUSD might have started the micro structure for wave (A) that will open the path towards a retracement of 50% minimum to complete bigger wave ii.If the two Exponential Moving Averages (EMA 20 – Red& EMA 40 – Blue) provide a strong support for the price, then we might consider the price action of XAUUSD in another alternative view (see following chart).
In this chart (1 Hour XAUUSD), we see that circle wave 3 has extended into the 262% zone of circle wave 1 and circle wave 4has retraced exactly 38.2% of circle wave 3, perfectly following Fibonacci number in accordance with Wave Theory.. The only wave left open to a discussion is the circle wave 5.
Wave circle 5has formed a structure like an Ending Diagonal (ED) where the price oscillates in a parallel channel. We expect the wave 4 of circle 5 to hold the downward bound of the channel in order for XAUUSD to try to make a new high into $1300 area. If $1235-$1240 holds (see Daily EMA20 & EMA40), then price will jump to test the high for the second time.
As ECB’s interest rate decision might move all markets on March 10, 2016, we advise to stay flat on positions on XAUUSD due to the complication of the structure of circle wave 5. Until then, let the market pave you the road and then walk in safe.