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Gold prices are down more than 1.3% this week with today’s decline taking bullion back into the yearly range lows ahead of tomorrow’s Non-Farm Payrolls (NFP) release. These are the updated targets and invalidation levels that matter on the XAU/USD charts heading into the close of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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

Gold Daily Price Chart (XAU/USD)

Gold Price Chart - XAU/USD Daily - GLD

Technical Outlook: In my latest Gold Price Technical Outlook we noted that XAU/USD had, “responded to near-term down-trend support and leave the immediate decline vulnerable while above today’s low.” Price rebounded to a high at 1288 on Friday before pulling back with the post-FOMC sell-off fueling a break below the yearly opening-range low at 1276. Gold is now attempting to break below confluence slope support with a weekly close below needed to keep the short-bias viable.

Subsequent downside objectives are eyed at 1258 backed closely by critical support at 1252/53- a region defined by the 50% retracement of the 2018 advance and the 200-day moving average. Monthly open resistance stands at 1283 with broader bearish invalidation at 1293.

Why does the average trader lose? Avoid these Mistakes in your trading

Gold 120min Price Chart (XAU/USD)

Gold Price Chart - XAU/USD 120minute - GLD

Notes: A closer look at price action shows Gold continuing to trade within the confines of a descending pitchfork formation extending off the March / April highs with a break below the median-line / weekly opening-rang low yesterday now testing the yearly range lows at 1266. A break below this threshold is needed to keep the short-bias viable targeting confluence support at the 100% extension of the late-February decline at 1258. Initial resistance stands back at 1272 backed by 1275/76- look for a reaction there IF reached. Ultimately a breach above the monthly open at 1283 would be needed to suggest a more significant low is in place.

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Bottom line: Gold is testing the yearly lows ahead of U.S. Non-Farm Payrolls (NFP) tomorrow. IF price is heading lower, advances should be limited by monthly open with a break lower here targeting key longer-term slope support. From a trading standpoint, a good spot to reduce short-exposure / lower protective stops- I’m on the lookout for downside exhaustion here near-term. IF price fails ahead of 1276 on a recovery, look for a break of these lows to fuel the next leg in price. Review our latest Gold 2Q forecasts for a longer-term look at the technical picture for XAU/USD prices.

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 Positioning- XAU/USD Sentiment - GLD - GC
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.5 (71.5% of traders are long) – bearishreading
  • Long positions are 6.6% lower than yesterday and 9.1% lower from last week
  • Short positions are 8.2% higher than yesterday and 1.4% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold (XAU/USD) price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

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Active Trade Setups

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex