XAUUSD A bearish pennant flag formation ahead of US inflation

XAUUSD

XAUUSD is forming a bearish pennant flag on the daily chart, signaling a potential continuation of the recent downtrend.
However, with US inflation data due to be released later today, volatility could increase, offering a possible pullback before resuming the broader trend.

Inflation data often affects gold as it impacts interest rate expectations, and this release could be pivotal in determining the next significant move.

Technical Setup:

The last seven daily candles, particularly the last two, suggest consolidation after a downtrend, forming a classic pennant pattern. This pattern typically signals continuation in the direction of the prior trend, which has been bearish.

The price action shows signs of accumulation, but this could transition into distribution if sellers regain control.

Key Levels to Watch:

Downside Breakout: A breakdown below would confirm a bearish continuation, with further downside targets around $2,585, $2,578 then $2,560.

Upside Pullback: If the inflation data is more dovish, indicating easing price pressures, we could see a temporary relief rally. A break above $2,620 would signal this, with the next resistance at $2,640.

Impact of US Inflation Data:

Cooling Inflation: If the data shows signs of cooling inflation, gold could experience a brief relief rally. This would reduce pressure from rising interest rates and might provide a short-term boost to the upside, allowing for a pullback.

Higher Inflation: If inflation remains sticky or exceeds expectations, it could solidify the bearish pennant's direction, with real yields pushing higher and further weakening gold's appeal.