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XAU/USD Technical Outlook: Gold Prices Meltdown into Q2 Close

XAU/USD Technical Outlook: Gold Prices Meltdown into Q2 Close

Michael Boutros, Strategist

Gold prices has made fresh yearly lows three of the last five trading days with the decline now approaching our secondary support target. While prices may see a near-term reprieve from the recent selling-pressure, the broader risk remains weighted to the downside for bullion. Here are the levels that matter for XAU/USD heading into the close of the week/month.Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Gold Daily Price Chart (XAU/USD)

Gold Daily Price Chart

Technical Outlook: In last week’s XAU/USD Technical Outlook, we noted that gold prices had validated, “a clear break of the monthly opening range keeps the focus on a late-month low in price. Subsequent support objectives are eyed at the 61.8% retracement of the July advance at 1266 backed by the median-line of the descending pitchfork formation (currently ~1256), 1251 and the 50% retracement of the broader 2016 advance at 1244.” Our levels / outlook remain unchanged- Gold broke below the 1266 target early in the week with price now approaching confluence support at 1251.

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Gold 240min Price Chart (XAU/USD)

Gold 240min Price Chart

Notes: A closer look at price action gives a better account of the near-term support confluence at the August swing lows / median-line at 1251. Note that near-term RSI divergence in the momentum profile further highlights the threat of a near-term recovery heading into this threshold. That said, the focus remains lower sub-1266 with near-term bearish invalidation up at the objective weekly opening-range highs at 1272. A break lower from here keeps the focus lower targeting the 50% retracement ta 1244 and the broader 78.6% retracement at 1239.

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Bottom line: The immediate focus is on a reaction on a move lower towards the 1251 support target with a near-term recovery to offer more favorable short entries while below the 50-line.

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

Spot Gold IG Client Positioning

Gold Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +5.66 (85.0% of traders are long) – bearishreading
  • Long positions are0.9% higher than yesterday and 2.6% lower from last week
  • Short positions are 5.6% lower than yesterday and 7.7% 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 and 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 or contact him at mboutros@dailyfx.com

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

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