Gold Price Outlook: XAU Defends Yearly Lows– Breakout Levels Defined
- Gold price sell-off defends yearly low-day close – breakout targets well-defined
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Gold prices are poised to close higher on the week after yet another failed attempt to break below long-term technical support. These are the updated targets and invalidation levels that matter on the XAU/USD charts heading into next week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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Gold Daily Price Chart (XAUUSD)
Technical Outlook: In my latest Gold Price Weekly Outlook we noted that the, “immediate focus is on the weekly close in relation to the 1275/76 zone.” – a region defined by the yearly opening-range low, the 38.2% retracement of the 2018 advance and the August trendline. XAU/USD briefly tested the yearly low-day close at 1270 before reversing sharply with the advance taking price back into the May open at 1283. Gold is poised to close above this long-term support zone for a sixth consecutive week and keeps the broader short-bias vulnerable while above- focus remains on a break of the monthly opening-range.
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Gold 120min Price Chart (XAUUSD)
Notes: A closer look at price action shows Gold trading within the confines of an embedded ascending channel formation off the weekly lows. Initial support rests with at 1280 with near-term bullish invalidation now raised to the weekly open at 1277.
Topside resistance objectives are eyed at the highlighted trendline confluence around ~1288 and the 61.8% retracement of the monthly decline at 1290 – look for a reaction there. Ultimately a breach / close above the upper parallel / May high-day close at 1296 would be needed to validate a larger reversal in price targeting 1302.
Bottom line: Gold prices have responded to multi-month slope support – the focus remains on a break of the recent consolidation range for broader guidance. From a trading standpoint, the immediate threat is for a larger rebound while above 1277 but look for possible near-term exhaustion near 1290 for a pullback. Ultimately a breach above 1296 is needed to suggest a more significant low may be in place. Weakness below the yearly low-day close at 1270 would mark resumption and shift the focus back towards the 100% extension at 1258.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
- A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.71 (78.8% of traders are long) – bearishreading
- Long positions are9.5% lower than yesterday and 1.2% higher from last week
- Short positions are1.3% higher than yesterday and 4.7% 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. Yet traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold 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
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.