XAU Breakout Trade Faces First Test

XAU Breakout Trade Faces First Test


Gold Price Weekly Outlook: XAU Breakout Trade Faces First Test

Gold has surged more than 2.8% off the yearly lows with price now testing initial resistance targets. These are the levels that matter on the XAU/USD weekly chart.

In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Gold prices surged more than 1.1% this week after a strong reversal off confluence support. The advance is now testing initial resistance objectives with our focus on the weekly close. These are the updated targets and invalidation levels that matter on the XAU/USD weekly price chart heading into June trade. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this setup and more.

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Gold Weekly Price Chart (XAU/USD)

GLD

Notes:In my last Gold Price Weekly Outlook we noted that the, “immediate focus is on the weekly close in relation to the 1275/76 zone. From a trading standpoint, a good spot to reduce short-exposure / lower protective stops.” Price continued to respect this support threshold on a close basis for the past seven-weeks with XAU/USD briefly registering a low at 1275 on Thursday before reversing sharply higher.

The advance is now testing resistance at the 2018 open at 1302and a weekly close above this threshold is needed to suggest a more significant reversal is underway targeting the 61.8% retracement of the yearly range at 1316 and the yearly high-week close at 1327. Key confluence support remains at the 1275/76– a weekly close below is still needed to fuel another leg lower with such a scenario targeting more significant support / broader bullish invalidation at 1253/58.

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

Bottom line:Gold prices remain constructive while above 1275/76 heading into the open of June trade with a weekly close above 1302 needed to fuel the next leg higher in price. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Be on the lookout for weakness early in the month to offer more favorable long-entries targeting a breach of the May range. I’ll publish an updated Gold Price Outlook once we get further clarity in near-term price action. Review our latest Gold 2Q forecasts for a longer-term look at the technical picture for XAU/USD prices.

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Gold Trader Sentiment

Gold

  • A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +2.76 (81.2% of traders are long) – bearish reading
  • The percentage of traders net-long is now its lowest since May 15th
  • Long positions are 12.5% lower than yesterday and 10.7% lower from last week
  • Short positions are 15.7% higher than yesterday and 14.6% 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. Yet traders are less net-long than yesterday & compared with last week and therecent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

Previous Weekly Technical Charts

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— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex





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