Technical Outlook: In my last Gold Price Outlook we noted that XAU/USD had, “plunged into a critical uptrend support and the focus is on a reaction off this threshold. From at trading standpoint, a good zone to reduce short-exposure /lower protective stops.” The support zone in focus was 1764-69– a region defined by the 50% retracement of the 2020 advance, the 61.8% Fibonacci extension of the 2020 decline and the 61.8% retracement off the March rally. Gold briefly registered an intraday low at 1750 into the close of June before rebounding with a six-day consecutive rally testing resistance this week at the 38.2% retracement of the June decline at 1814.
The decline off the June highs looks to have completed a five-wave pattern and suggests a corrective stance on this gold recovery may be appropriate. With that in mind, key daily support now expands to 1764/76– a region which now includes the monthly open, the 61.8% retracement of the most recent advance and the sliding parallel extending off the yearly low. A topside breach above this resistance zone would satisfy a corrective bounce and may offer a fade-able event from more favorable levels. Ultimately a breach / close above 1853 would be needed to mark resumption of the broader uptrend.
Notes: A closer look at Gold price action shows XAU/USD breaching near-term downtrend resistance last week with the breakout trading within a newly identified ascending pitchfork formation off the lows. Price turned just ahead of the upper parallel today on building divergence with the pullback now testing initial support at the median-line / 2012 high at 1795– look for near-term inflection here with a break risking a larger setback towards the weekly opening-range low at 1784 and 1776– both zones of interest for possible downside exhaustion IF reached. A close above 1814 would expose the upper parallel / 50% retracement at 1833.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
– Written by Michael Boutros, Technical Strategist with DailyFX
Follow Michael on Twitter @MBForex
This content was originally published here.
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