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Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap

Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap

Michael Boutros, Strategist

Gold Technical Price Forecast: XAU/USD Weekly Trade Levels

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Gold prices started the year on defense with XAU/USD poised to close the week down more than 2% to trade at 1792 in early US trade on Friday. Prices have carved out the January opening-range between competing Fibonacci levels and the focus in the days ahead is on a breakout to offer guidance on our near-term directional bias. These are the updated targets and invalidation levels that matter on the XAU/USD weekly technical chart. Join my Weekly Strategy Webinarson Monday mornings for an in-depth breakdown of thisgold technical setup and more.

Gold Price Chart - XAU/USD Weekly

Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Notes: In my last Gold Weekly PriceOutlook we noted that the recent XAU/USD recovery was trading into near-term resistance heading into the yearly open, “below the 61.8% retracement of the November sell-off at 1829.” The 61.8% Fibonacci retracement of the December rally now highlights support at 1783 with key support / bullish invalidation unchanged at 1754. A topside breach / close above the yearly open would shift the focus towards subsequent resistance objectives the highlighted trendline confluence near ~1855 and the 100% extension of the August rally at 1876.

Bottom line: This week’s gold pullback keeps the focus on the Fibonacci range between 1783-1829 – look for a near-term breakout to offer guidance with the broader outlook still constructive while above 1754. From a trading standpoint, look for an exhaustion low early in the month with a breach / close above the 2021 trendline needed to clear the way for resumption towards critical resistance at the 2021 high-close / 61.8% retracement of the 2020 decline at 1903/23. Note that a decline beyond the December low could fuel another bout of accelerated losses- stay nimble here. I’ll publish an updated Gold Price Outlook once we get further clarity on the near-term XAU/USD technical trade 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 – XAU/USD Price Chart

Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.26 (76.53% of traders are long) – typically bearishreading
  • Long positions are14.59% higher than yesterday and 18.08% higher from last week
  • Short positions are 2.42% lower than yesterday and 0.34% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Gold-bearish contrarian trading bias from a sentiment standpoint.

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Key Data Releases Next Week – Economic Calendar

Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap

Previous Weekly Technical Charts

- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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