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Gold Price Technical Outlook: XAU/USD Correction Underway

Gold Price Technical Outlook: XAU/USD Correction Underway

2019-02-28 21:30:00
Michael Boutros, Technical Strategist
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Gold prices reversed off trend resistance this week with the move risking further losses heading into the March open. These are the updated targets and invalidation levels that matter on the XAU/USD charts into the close of the week. Review this week's Strategy Webinar for a complete review of this setup and more.

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Gold Daily Price Chart (XAU/USD)

Gold Price Chart - XAU/USD Daily

Technical Outlook: In my last Gold Technical Outlook we noted that price had reversed off channel resistance on building momentum divergence with the immediate threat lower while below 1341. The decline has now broken below monthly-open support at 1321 and keeps the focus on a larger correction in price with broader bullish invalidation steady at the 1302 confluence support zone.

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Gold 120min Price Chart (XAU/USD)

Gold Price Chart - XAU/USD 120min

Notes: A closer look at price action shows gold trading within the confines of a near-term descending channel formation extending off the weekly highs with price now approaching targeted support at the 38.2% retracement at 1311. Look for a reaction there with a break lower targeting the 100% ext at 1307 and key support at 1302/03 – an area of interest for possible exhaustion / long-entries IF reached. Initial resistance stands at 1321 backed by the weekly open at 1327 with broader bearish invalidation at the weekly opening-range high at 1332.

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Bottom line: The immediate focus remains lower while within this formation but we’re looking for a reaction on move towards near-term channel support for guidance. From a trading standpoint, I’ll favor fading weakness targeting 1311 & 1307. Ultimately a larger setback here may offer more favorable long-entries from lower levels next month.

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

Gold Trader Sentiment

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  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.34 (70.1% of traders are long) – bearishreading
  • Long positions are1.0% lower than yesterday and 13.4% higher from last week
  • Short positions are 3.0% lower than yesterday and 12.7% 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 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

https://www.dailyfx.com/gold-price/how-to-trade-gold.html?ref-author=Boutros

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