- Gold prices pullback from yearly range highs – focus is on support around 1316
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Gold prices have shed nearly 2% from the fresh yearly highs registered last week and we’re on the lookout for support on this pullback. These are the updated targets and invalidation levels that matter on the XAU/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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Gold Daily Price Chart (XAU/USD)
Technical Outlook: In my latest Gold Price Outlook we noted that the breakout was testing initial resistance at 1328/29 - “A topside breach of this resistance barrier would keep the focus on subsequent objectives at the yearly high-day close at 1337 and the high-close at 1341 – look for a bigger reaction there If reached.” A topside break of the yearly-high close saw price register a high at the 2018 high-day close at 1348 before pulling back.
Interim support rests at the 38.2% retracement of the yearly range at 1316 with broader bullish invalidation steady at 1302. Daily resistance at the new high-day close at 1340 with a breach / close above 1348 needed to fuel the next leg higher targeting the 2016 high-close at 1366.
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Gold 120min Price Chart (XAU/USD)
Notes: A closer look at price action shows Gold trading within the confines of a near-term descending pitchfork formation extending off the monthly highs. Price is holding median-line support in early US trade – look for initial resistance at 1328 backed by 1334- both areas of interest for possible exhaustion. Interim support rests at 1316 backed by 1302/03 – look for a stronger reaction there IF reached.
Bottom line: The Gold breakout risks a larger pullback for now while below 1341and we’re looking for a low nearby. From a trading standpoint, look for downside exhaustion on a final wash-out towards the lower parallels for possible entries. Ultimately a breach above 1341 / the yearly opening-range high is needed to validate resumption of the broader uptrend. 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 +1.21 (54.7% of traders are long) – weak bearishreading
- Long positions are5.0% higher than yesterday and 12.8% lower from last week
- Short positions are2.0% higher than yesterday and 25.6% 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 & last week, and the combination of current positioning and recent changes gives us a stronger Gold-bearish contrarian trading bias from a sentiment standpoint.
See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!
Active Trade Setups
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- Aussie Price Outlook: Australian Dollar Breakout Vulnerable into RBA
- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex