Gold Technical Update
The 1H chart for XAU/USD or gold, shows a market that did follow through with the double bottom formation and has developed a corrective rally to 38.2% retracement of the decline from 1762.70 to 1560.29. This correction developed in the form of a rising channel, and has pushed the 1H RSI above 70 establishing short-term bullish momentum. If the RSI now fails to break below 40, we should consider a possible rally above 38.2% retracement toward 1661.97, 50% retracement, or 1685.75, 61.8% retracement.
However, consider the fact the 1H chart shows failure to break above the 200 hour simple moving average. The ability to stay above the 200H SMA would be needed to push for the extension of the corrective rally. Otherwise, we are poised for bearish continuation, or at least an attempt back toward 1561.25.
The 4H chart actually shows no loss of bearish momentum just yet as the RSI reading respected 60, while price respected 38.2% retracement. The strong beraish candle that resulted is indicative of a bearish continuation mode. Still, I would watch out for a bear-trap that can lead into further consolidation either sideways, or toward 50% or 61.8%. The maximum bearish outlook at the moment is the 1561.25 low, with possibility of failure even to this low if it is indeed a bear-trap. Below the 1560 area, we open up 1500, 1480 as next possible support pivots.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.