Gold prices have plummeted more than 5.5% off the 2019 highs with the precious metal probing fresh yearly lows to trade at 1274 ahead of the New York close on Thursday. These are the updated targets and invalidation levels that matter on the XAU/USD weekly chart. for an in-depth breakdown of this setup and more.
Gold Weekly Price Chart (XAU/USD)
Notes: In my last Gold Weekly Technical Outlook we noted that a weekly doji formation off the monthly highs left the risk, “weighted to the downside while below 1302,” with near-term support eyed, “at 1275/76 – “where the objective yearly opening-range low converges on the 38.2% retracement of the 2018 advance and former pitchfork resistance.” XAU/USD is testing this threshold now with a weekly close below needed to keep the short-bias viable heading into next week.
A downside break targets broader bullish invalidation at ~1253/58– a region defined by the 52-week moving average, the 100% extension of the decline off the yearly highs and the 50% retracement of the 2018 advance (area of interest for possible exhaustion IF reached). Monthly open resistance stands at 1292 with a breach above the 2019 high-week close at 1327 needed to mark resumption of the broader uptrend.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: Gold is trading into confluence support here on the back of a five-day decline. While a break of the monthly opening-range lows does keep the focus lower into the close of April, price is now testing the yearly lows and a weekly close below former pitchfork resistance is needed to keep the short-bias in play. From at trading standpoint, a good place to reduce short-exposure / lower protective stops – be on the lookout for near-term exhaustion / recovery. Review my latest Gold Price Technical Outlook for a closer look at the near-term trading levels.
Even the most seasoned traders need a reminder every now and then- Avoid these Mistakes in your trading
Gold Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +2.88 (74.2% of traders are long) – bearish reading
- Long positions are2.3% higher than yesterday and 9.5% higher from last week
- Short positions are 3.1% higher than yesterday and 6.0% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Goldprices (XAU/USD) may continue to fall. 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 Gold trading bias from a sentiment standpoint.
See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex