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Gold Weekly Technical Outlook: XAU/USD Breakout Eyeing Initial Targets

Gold Weekly Technical Outlook: XAU/USD Breakout Eyeing Initial Targets

Michael Boutros, Strategist

Gold Technical Outlook

In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend.Gold prices rallied for the second consecutive week with the precious metal up more than 1.3% to trade at 1219 ahead of the New York close on Friday. The advance takes prices through a key technical resistance zone and clears a multi-week range we’ve been tracking. Here are the updated targets and invalidation levels that matter on the XAU/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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Gold Weekly Price Chart

Gold Weekly Technical Outlook: XAU/USD Breakout Eyeing Initial Targets

Technical Outlook: Gold prices have traded within the confines of a broad ascending pitchfork formation extending off the 2013 & 2015 lows with price rebounding sharply off the lower parallel back in August. In last month’s Gold Weekly Technical Outlook I noted that, “Heading into the start of October trade, Gold prices will need to hold above support at 1171 IF the broader 2015 uptrend is to remain viable. From a trading standpoint, I’ll be looking for evidence of an exhaustion low early next month to offer more favorable long-entries while above multi-year structural support

For nearly 8 weeks, Gold continued to trade within a well-defined range with our XAU/USD scalp report highlighting the breakout potential early in the month. This week’s outside candle takes price through the October opening-range highs and confluence resistance at 1210/14- note that he median-line of the yearly descending pitchfork converges on this zone and further highlights the technical significance of a weekly close above this threshold.

The first major weekly resistance zone on the topside is eyed at 1235/38- a region defined by the 38.2% retracement of the yearly range, the 100% extension of the advance off the August low, the December swing low and the long 200-week moving average. Look for a bigger reaction there IF reached.

Why does the average trader lose? Avoid these Mistakes in your trading

Bottom line: Gold prices have cleared a technical resistance confluence / the monthly opening-range high and keeps the outlook weighted to the topside. IF price is indeed heading higher, losses should be limited to this week’s low and we’ll raise our broader bullish invalidation level to the low-week close at 1184. From a trading standpoint, I’ll continue to favor fading weakness while above this week’s open at 1203 targeting the 1235/38 resistance range. Trading short-term? Review this week’s Gold Scalp Report for a complete technical breakdown of the intraday trading levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment

Gold Weekly Technical Outlook: XAU/USD Breakout Eyeing Initial Targets
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +4.02 (80.1% of traders are long) – bearishreading
  • The percentage of traders net-long is now its lowest since October 4th
  • Long positions are15.5% lower than yesterday and 5.1% lower from last week
  • Short positions are 75.3% higher than yesterday and 35.4% higher 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

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Key Economic Data Releases Next Week

Gold Weekly Technical Outlook: XAU/USD Breakout Eyeing Initial Targets

Economic Calendar - latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Learn how to Trade with Confidence in our Free Trading Guide

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

Other Weekly Technical Forecast:

Australian Dollar Forecast: AUD/USD, GBP/AUD May Still Make Breakout Progress Despite U-turns

British Pound Forecast: Turning Short-Term Negative

US Dollar Forecast: Dollar's Retreat Adds Considerable Weight to a Five-Month Reversal Pattern

Equity Forecast: Technical Forecast for the Dow, S&P 500, DAX, FTSE and Nikkei

Euro Forecast: Can the Euro Escape Gravity This Week

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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