Gold prices have plummeted nearly 6% from the yearly high with today’s decline taking prices into multi-month trend support at fresh yearly lows. 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 (XAUUSD)
Technical Outlook: In my latest Gold Weekly Technical Outlook we noted that, “While a break of the monthly opening-range lows does keep the focus lower into the close of April,” price was approaching major support into fresh yearly lows. A break below the 1275/76 support zone was halted today at the August trendline support and leaves the immediate short-bias vulnerable while above this slope.
So, did Gold just bottom? A breach / close back above the yearly opening-range low at 1276 would be needed to alleviate further downside pressure targeting the January trendline (currently ~1285) backed by broader bearish invalidation at the 100-day moving average / monthly open at 1290/92. A downside break would keep the short-bis viable targeting more significant support at 1253/58– a region defined by the 100% extension of the yearly decline and the 50% retracement of the late-2018 advance. Look for a bigger reaction there IF reached.
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Gold 120min Price Chart (XAUUSD)
Notes: A closer look at price action shows Gold trading within the confines of a descending pitchfork formation extending off the March / April highs with price responding to confluence support today at the lower parallel. It’s a make-or-break here.
A breach above near-term resistance targets the yearly open at 1280 backed closely by the median-line / 38.2% retracement at 1283 – a rally surpassing this threshold would be needed to shift the near-term focus higher targeting the monthly open & the upper parallels.
Bottom line: Gold has responded to near-term down-trend support and leave the immediate decline vulnerable while above today’s low. From a trading standpoint, good spot to reduce short-exposure and lower protective stops – be on the lookout for possible exhaustion off this low with a close above 1283 needed to suggest a near-term recover is underway. Continued weakness would keep the focus on 1258. 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 +2.68 (72.8% of traders are long) – bearishreading
- The percentage of traders net-long is now its lowest since April 9th
- Long positions are6.5% lower than yesterday and 6.6% lower from last week
- Short positions are 0.9% higher than yesterday and 13.2% 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 and compared with last week. Recent changes in sentiment warn that the current Gold (XAU/USD) 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!
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex