Is XAU/USD on the Verge of a Breakdown?

  


Gold prices are grinding into a critical long-term support zone with the weekly opening-range in focus heading into the extended holiday break and the close of November trade. Thin liquidity conditions could fuel some radical price action over the next few days so stay nimble here. These are the updated targets and invalidation levels that matter on the XAU/USD charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Sterling price setup and more.

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Gold Price Chart – XAU/USD Daily

Gold Price Chart - XAU/USD Daily - GLD Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Technical Outlook: In my latest Gold Price Outlook we noted that XAU/USD was trading into a, “long-term key support zone at 1451/61.” Gold has continued to test this support region with this zone now defining the weekly opening-range. A break / close below the 2018 up-slope (red) would be needed to validate a break with subsequent support objectives eyed at the August 2013 swing highs at 1433. Initial daily resistance stands with the median-line backed by 1479 with broader bearish invalidation at the 61.8% retracement at 1489.

Gold Price Chart – XAU/USD 240min

Gold Price Chart - XAU/USD 240min - GLD Trade Outlook - Technical Forecast

Notes: A closer look at gold price action shows XAU/USD continuing to trade within the confines an descending pitchfork formation off the yearly highs with the median-line capping the weekly highs. The immediate focus is on a break of the 1451-1461 range with the short-bias vulnerable while above the monthly opening-range lows. A topside breach looks for a stretch towards 1473 and 1479/81– look for a larger reaction there IF reached.

Expect accelerated losses if gold breaks lower here with such a scenario targeting the 25% parallel, currently around ~1440 backed by 1433 and pitchfork support – both areas of interest for possible downside exhaustion IF reached.

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Bottom line: Gold prices are trading within the confines of a long-term critical support zone. From a trading standpoint, we’ll take a more neutral stance heading into the extended holiday break / end of month – we’re looking for a reaction / pivot here. Weakness beyond the monthly lows could open a larger decline in price amid thin markets- use caution here. Ideal scenario – looking for a low to fade for a larger rebound higher in price- that said, we’ll reassess this into the open of December trade. Review my latest Gold Price Weekly Outlook for a closer look at the longer-term XAU/USD technical trading levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment – XAU/USD Price Chart

Gold Trader Sentiment - XAU/USD Price Chart - GLD Trade Outlook - Technical Forecast

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.99 (74.94% of traders are long) – bearishreading
  • Long positions are0.85% lower than yesterday and 1.71% higher from last week
  • Short positions are 7.58% higher than yesterday and 5.19% 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 and recent changes in positioning warn that the current Gold 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!

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– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex





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