Gold (XAU/USD) is licking its wounds after plummeting 3% on Monday, as the haven demand for the US dollar resurfaced amid growing coronavirus risks and US fiscal deadlock. The greenback jumped to six-week highs across its main competitors on concerns over the global economic recovery, especially after localized lockdowns were announced in key European economies.
‘Sell everything’ mode returned to markets and knocked down gold alongside global equities. Despite the slump, the metal managed to close the day above the $1900 mark. Let’s look at the technical charts to gauge whether the bulls could be offered any reprieve ahead of Day 1 of the Fed Chair J. Powell’s testimony.
Gold: Key resistances and supports
The Technical Confluence tool shows that gold failed to sustain the rebound from six-week lows above the powerful barrier at $1915, which is a convergence of the Fibonacci 23.6% one-month and previous high on 15-minutes.
Therefore, the sellers now probe the next downside target at $1910, where the Fibonacci 38.2% one-day, SMA10 one-hour and previous low four-hour intersect.
The Fibonacci 161.8% one-week at $1907 is a soft cap, which could be tested if the bulls fail to defend the $1910 level.
Acceptance below the latter could trigger a sharp sell-off towards $1891, the pivot point one-week S3.
On the flip side, a firm break above the aforesaid $1915 barrier is critical for a sustained recovery momentum. The next minor resistance is aligned at $1917, the SMA10 on 15-minutes.
The bulls will then aim for $1927, the confluence of the Fibonacci 61.8% one-day and SMA100 15-minutes.
The bearish bias will likely remain intact unless gold recaptures the fierce resistance at $1933 with conviction. The hurdle is the intersection of the pivot point one-week S1 and the previous week low.
Here is how it looks on the tool
About the Confluence Detector
The TCI (Technical Confluences Indicator) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.
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