Gold prices are testing a critical resistance confluence at the late-2011 / 2012 lows and the puts the immediate long-bias at risk while below this key threshold. These are the updated targets and invalidation levels that matter on the XAU/USD charts this week. Review this my latest Strategy Webinar for an in-depth breakdown of this gold trade setup and more.
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Gold Price Chart – XAU/USD Daily
Technical Outlook: In my latest Gold Price Weekly Outlook we warned that the, “gold breakout is getting deep with the advance now maturing towards long-term uptrend slope resistance targets. From at trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards trend resistance around 1522/26– a region of interest for possible near-term exhaustion.” Price briefly registered a high today at 1534 before pulling back with the advance now vulnerable while below 1526.
Initial daily support rests at 1482 backed by 1451 with broader bullish invalidation now raised to 1433. A topside breach / close above the 1522/26 resistance zone is needed to keep the long-bias viable with such a scenario targeting 1558 and the 61.8% retracement of the decline off the 2011 record highs at 1585.
Gold Price Chart – XAU/USD 120min
Notes: A closer look at gold price action shows XAU/USD breaching pitchfork resistance only to slam into critical resistance at 1522/26 in early European trade. The advance remains at risk while below this threshold and we’re on the lookout for an exhaustion pullback here. Weekly open support rests at 1497 backed by the Fibonacci confluence at 1482/83– look for a reaction there IF reached. A downside break targets the median-line backed by 1451/52– an area of interest for possible near-term exhaustion.
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Bottom line: Gold prices are testing a critical resistance confluence at 1522/26 and we’re looking for a reaction up here. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Be on the lookout for signs of exhaustion with a break below 1483 needed to suggest a larger correction is underway. Ultimately a larger setback would have us looking or more favorable long-entries closer to trend support. Review our latest Gold 3Q 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 +1.7 (63.0% of traders are long) – bearishreading
- Long positions are10.0% higher than yesterday and 15.2% higher from last week
- Short positions are4.7% higher than yesterday and 13.0% 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. Traders are further net-long than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger Spot Gold-bearish contrarian trading bias from a sentiment standpoint.
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
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