XAU/USD Technical Outlook: Gold Prices Meltdown into Q2 Close
- Gold breakdown underway- risk for price recovery from lower levels in the days ahead
- Check out our 2018 Gold (XAU/USD) projections in our Free DailyFX Trading Forecasts
- Join Michael for Live Weekly Strategy Webinars on Mondays at 12:30GMT
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)
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.
Gold 240min Price Chart (XAU/USD)
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
- 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!
Economic Calendar - latest economic developments and upcoming event risk
Other Setups in Play
- EUR/USD Price Analysis: Euro Breakdown Targets 2018 Lows
- GBP/USD Technical Outlook: Sterling Threatens Larger Price Reversal
- US Dollar Reversal Under Review– USD Setup We’re Tracking This Week (Webinar)
- NZD/USD Price Analysis: Kiwi Testing Support at Fresh Yearly Lows
- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.