Gold is trading near four-week highs with price responding to confluence technical resistance early in the week. While the broader outlook remains weighted to the topside, the risk remains for further weakness near-term with gold prices nearly unchanged for the month of March. These are the updated targets and invalidation levels that matter on the XAU/USD charts this 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 (XAU/USD)
Technical Outlook: In my latest Gold Weekly Technical Outlook, we noted that price was responding former trendline resistance, as support with a close above the 2018 open at 1302 needed to keep the focus higher. Gold stabilized above this threshold into the close of the week with the advance responding to confluence resistance today the 61.8% retracement of the February decline at 1321.
The immediate advance is vulnerable below this threshold with monthly open support eyed at 1313 backed by the trendline confluence around ~1306. Near-term bullish invalidation now raised to 1302. A daily close above confluence resistance targets the yearly high-day close at 1337.
Gold 120min Price Chart (XAU/USD)
Notes: A closer look at price action shows gold trading within the confines of an ascending pitchfork formation extending off the monthly lows with the advance turning from the upper parallel early in the week. Interim support rests at 1311/13 backed by the lower parallel around ~1306– weakness beyond this threshold would put us neutral – look for a reaction at 1302 for guidance IF reached.
Key near-term resistance remains at 1321/23 – a topside breach exposes with upper parallel, around ~1327 backed by the 78.6% retracement at 1332. Ultimately a close above the yearly high-day close at 1337 would be needed to mark resumption of the broader uptrend.
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Bottom line: Gold prices are responding to uptrend resistance here and leaves the immediate long-bias vulnerable while below 1323 for now. From a trading standpoint the risk remains for a test of the lower parallel before resumption. Look for possible price exhaustion on a move lower to offer more favorable long-entries while above 1302.
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Gold Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +2.07 (67.5% of traders are long) – bullish reading
- Long positions are3.1% lower than yesterday and 5.4% lower from last week
- Short positions are 37.9% higher than yesterday and 21.3% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests spot Gold prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long 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
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