- Gold prices in consolidation just above key pivot zone at 1522/26
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Gold prices rallied nearly 2% into the start of the week but closed just fractionally higher on the session yesterday after failing just ahead of resistance. The move leaves the immediate long-bias vulnerable in the near-term with the weekly opening-range now in focus. These are the updated targets and invalidation levels that matter on the XAU/USD charts this week. Review this my latest Strategy Webinar for an in-depth breakdown of this gold trade setup and more.
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Gold Price Chart - XAU/USD Daily
Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview
Technical Outlook: In my latest Gold Price Outlook we noted that XAU/USD was in, “consolidation just below a major pivot zone and we’re looking for the breach to mark resumption of the broader uptrend- that said, the advance remains vulnerable near-term while below.” The zone in focus was 1522/26 – a region defined by the December 2011 & 2012 lows. Prices ripped through this threshold early in the week with the advance failing just pips ahead of our 1558 resistance target. The pullback is now testing this same zone as support and IF broken, could fuel a larger correction in price. Note that gold has not been able to mark a substantial daily close above this threshold yet (closed at 1527 yesterday) with ongoing momentum divergence continuing to highlight the risk for near-term exhaustion.
Gold Price Chart - XAU/USD 120min
Notes: A closer look at gold price action shows XAU/USD turning just ahead of the upper parallel for the ascending pitchfork formation we’ve been tracking off the monthly lows. Price turned just ahead of he upper parallel with the weekly opening-range now taking shape just above the 1522/26 pivot zone- note that the median-line converges on this region over the next two days.
A break below risks a larger correction in price with such a scenario targeting soft support at 1512 backed by the trendline confluence around ~1503. Near-term bullish invalidation now raised to 1494/96. Topside resistance objectives are unchanged at 1558- a breach there exposes the upper parallel (currently ~1570s) and the key 61.8% retracement of the decline off the record highs in gold at 1585.
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Bottom line: Gold prices failed yesterday just ahead of slope / lateral resistance and risks defining this spike as a raised ceiling (near-term bearish). From a trading standpoint, we remain neutral at these levels- look for possible topside exhaustion while below 1558 if price rebounds here with a break / close below 1522 needed to suggest a larger decline is underway. Ultimately, the trade remains constructive while within this formation and we’ll favor fading weakness while above the lower parallel.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Gold Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +1.83 (64.7% of traders are long) – bearishreading
- Long positions are4.4% higher than yesterday and 2.5% higher from last week
- Short positions are 4.5% lower than yesterday and 5.8% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are further net-long than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger Spot Gold-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!
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- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
