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Gold Price Technical Outlook: XAU/USD Consolidation Break Imminent

Gold Price Technical Outlook: XAU/USD Consolidation Break Imminent

2020-05-07 15:30:00
Michael Boutros, Strategist
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Gold Technical Price Outlook: XAU/USD Near-term Trade Levels

Gold prices are virtually unchanged this week as XAU/USD continues to contract into the apex of a multi-week consolidation formation just below critical, multi-year resistance. We’re looking for the breakout for guidance with the broader gold rally still vulnerable while below the yearly high-day close. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts in the days ahead. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold trade setup and more.

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Gold Price Chart - XAU/USD Daily

Gold Price Chart - XAU/USD Daily - GLD Trade Outlook - GC Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Technical Outlook: In my last Gold Price Outlook we noted that the XAU/USD rally had, “responded to long-term uptrend resistance and while the broader outlook remains weighted to the long-side the immediate risk remains for a deeper pullback.” Price has continued to hold below critical resistance near the yearly high-day close / 78.6% retracement at 1726/33 for the past three weeks with the monthly opening-range taking shape just below.

Monthly open support rests at 1685 backed by the April trendline (pink) – a break / close below this slope is needed to keep the short-bias viable with subsequent support objectives eyed at 1634/43. A topside breach of this consolidation pattern would shift the focus back towards the 2012 high at 1795.

Gold Price Chart - XAU/USD 120min

Gold Price Chart - XAU/USD 120min - GLD Trade Outlook - GC Technical Forecast

Notes: A closer look at Gold price action sees XAU/USD trading within the confines of a descending pitchfork formation extending off the April highs. A weekly opening-range has been carved out just above slope support and we’re looking for the break for guidance. Initial resistance steady at 1712 with 1726/33 still critical. A break lower exposes the 25% parallel (currently ~1660s) backed by the 100% extension of the late-April decline at 1651- look for a bigger reaction there IF reached.

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Bottom line: Gold prices are in consolidation just below key resistance – from a trading standpoint, the risk remains for a deeper setback in prices while below the 1726. Look for topside exhaustion ahead of this threshold IF price is indeed heading lower with a break of the weekly range lows exposing subsequent objectives towards the lower parallel. Review my latest Gold Weekly Price Outlook for a closer look at the longer-term XAU/USD technical trading levels. Keep in mind US Non-Farm Payrolls are on tap tomorrow.

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

Gold Trader Sentiment – XAU/USD Price Chart

Gold Trader Sentiment - XAU/USD Price Chart - GLD Trad Outlook - GC Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.79 (73.62% of traders are long) – bearishreading
  • Long positions are5.11% higher than yesterday and 1.74% higher from last week
  • Short positions are 4.18% lower than yesterday and 0.33% higher 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 Gold-bearish contrarian trading bias from a sentiment standpoint.
Gold MIXED
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Change in Longs Shorts OI
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Weekly 7% 8% 8%
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- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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