XAU/USD Technical Outlook: Gold Value Break-out Stalls

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Gold prices broke through the June opening range highs this week but the breakout we’ve been tracking has stalled after rallying more than 2% off the yearly low. Here are the levels that matter for XAU/USD heading into the close of the week.

Gold Daily Price Chart (XAU/USD)

Gold Daily Price Chart - XAU/USD

Technical Outlook: In last week’s XAU/USD Technical Outlook, we highlighted that gold prices had, “set a well-defined June opening range just below a key resistance range at 1302/07– a region defined by the October highs, the January, March and May lows and the yearly open. Note that the 75% line of the descending pitchfork formation also converges on this region into the start of next week with a pending RSI resistance trigger in view.

Gold rallied through yearly open resistance at 1302 today (break of the RSI trigger as well) with pricing registering a high at 1309 before turning just ahead of slope resistance. The 200-day moving average converges on former swing highs / lows at 1307 and a daily close above this level is needed to keep the focus higher. A topside breach targets confluence resistance at the 100% extension / 38.2% retracement at 1313/15.

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Gold 240min Price Chart (XAU/USD)

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Notes: Last week we cited that, “Technical considerations made earlier in the week on the US Dollar (DXY), favor a near-term topside breach of this consolidation in gold prices before moving lower.” Gold prices did break to the topside of the consolidation range but the advance failed ahead of slope resistance- so was that it?

IF this rally has legs, look for interim support back at the 1302 with bullish invalidation now raised to the weekly lows at 1292. Weakness beyond 1285 would mark resumption for the broader downtrend with such a scenario targeting 1263.

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Bottom line: We’re looking for support on this pullback with a breach above the slope resistance targeting 1313/15 backed by the 50% retracement at 1323. The focus will be on the weekly close in relation to the yearly open (1302) for guidance.

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Spot Gold IG Client Positioning

Gold Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.49 (77.7% of traders are long) –bearishreading
  • Long positions are 8.3% lower than yesterday and 8.5% lower from last week
  • Short positions are 16.1% higher than yesterday and 12.6% 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment 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 or contact him at mboutros@dailyfx.com