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Gold Price Outlook: First Major Test for the XAU/USD Breakout

Gold Price Outlook: First Major Test for the XAU/USD Breakout

2018-10-23 15:00:00
Michael Boutros, Strategist
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Gold has been on the offensive with the price breakout now testing BIG technical resistance after rallying more than 6.5% off the yearly lows. While the broader focus remains higher, the immediate advance looks vulnerable as price approaches this critical barrier. These are the updated targets and invalidation levels that matter on the XAU/USD charts from here. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Gold Daily Price Chart

Gold Daily Price Chart (XAU/USD)

Technical Outlook: In our latest Gold Weekly Technical Outlook we highlighted the first major resistance confluence for the gold breakout 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.” Gold is probing this region today and a close above is needed to keep the immediate long-bias viable near-term. Daily support rest with the 100-day moving average backed by 1214/15. Broader bullish invalidation remains steady at 1208.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold 240min Price Chart

Gold 240min Price Chart (XAU/USD)

Notes: A closer look at price action shows gold continuing to trade within the confines of the ascending pitchfork formation we’ve been tracking for months now in the XAU/USD Scalp Reports. A multi-day consolidation structure looks to have broken today- but the advance is running into some key technical targets on the topside.

Note that the upper parallel comes in just above the 1235/38 resistance range – the advance is vulnerable while below this region with initial support eyed at the trendline confluence near ~1229 and 1224- weakness beyond this threshold would shift the focus back towards the median-line. A topside breach of this formation would likely fuel accelerated gains for gold with such scenario targeting the measured move / 2017 August low at 1251/52 and the 50% retracement of the yearly range at 1261/63.

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Bottom line: The immediate focus is on a reaction at this key resistance barrier. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. I’ll be on the lookout for possible price exhaustion while below parallel resistance for now- ultimately a larger pullback would offer more favorable long-entries while within this formation.

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 Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +4.45 (81.6% of traders are long) – bearishreading
  • Long positions are0.5% higher than yesterday and 5.5% lower from last week
  • Short positions are 2.1% higher than yesterday and 4.7% 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 Spot Gold price trend may soon reverse higher despite the fact traders remain net-long.

Traing the Gold-Silver Ratio: Strategies & Tips

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- Written by Michael Boutros, Currency Strategist with DailyFX

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

https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/scalping_report/2018/10/19/GBPJPY-Price-Outlook-British-Pound-Vulnerable-Below-This-Level-Tecnical-Chart-Forecast-Sterling-Japanese-Yen-MBCS.html?ref-author=Boutros

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