Gold Technical Update

Previous: Gold Tests a Key Support Zone; A Break Completes a Double Top (11/17) 

XAU/USD (Gold)


Gold has cracked 61.8% retracement of the 1603.55-1802.70 rally. Looking at the 1H chart, it should be noted that we have also broke below the 200 period simple moving average in the 4H chart, and pushed the RSI reading in the 4H chart below 30, reflecting short to medium term bearish momentum. Gold is now in a corrective rally from a new pivot near 1668. As the market trades near 1700, it is also about to test a declining channel resistance.

A break above 1700 and the channel extends the current corrective rally. If the 200SMA does not hold as resistance, the market can rally toward 1735. A bearish market should respect this area, which was support, now as resistance. This allows for a bearish motive wave development and makes the case for the downside more clear. (We might be able to give it some wiggle space to the upside even toward 1750 and still call it a bearish market.)

The 1H gold chart shows the market just below the channel resistance. The RSI reading is just under 60, a break above which suggests loss of short-term bearish momentum established by this declining channel trading. Otherwise, if the market holds 1700 area as resistance, keeping the RSI below or at least near 60, and gold falls back below the 1686 pivot, we are likely to remain in the declining channel. A negative reversal signal (higher RSI high, lower price high), further suggests a swing lower, with a measured move targeting 1634. To be conservative we should also monitor for support at 1646.17, 78.6% retracement.


Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.