Gold reversal aims at $1900 target in bullish wave 3

• Gold (XAU/USD) has made a bullish bounce at the 38.2% Fibonacci retracement level. The shallow Fib is typical for a wave 4 pattern (purple) within a strong trend.

• The XAU/USD weekly chart made a very strong bullish impulse. This is probably a wave 3 (purple). The correction seems to be part of an ABC (pink) in wave 4 (purple).

• On the lower 4 hour chart, we can see signs that the bearish price swing is completed. A wave 5 pattern in wave 5 seems to finish the bearish push.

This article reviews the expected price swings and wave patterns.

Price charts and technical analysis

The XAU/USD weekly chart made a very strong bullish impulse. This is probably a wave 3 (purple). The correction seems to be part of an ABC (pink) in wave 4 (purple):

1. No divergence pattern is visible, which means that the uptrend is not losing momentum.

2. The uptrend is fully established, with the 21 ema zone above the 144 ema, 233 ema and 610 ema.

3. Therefore, it seems probable that the uptrend will eventually continue for at least one more higher high.

4. The first question is whether price action will be able to bounce significantly away from the 38.2% Fib. We already see bullish price action (green box). A strong bullish weekly candle in the next 3 weeks would confirm an upside (green arrows).

5. The next question is whether the wave 4 (purple) is already completed or will price action extend the ABC pattern with a larger ABC (red). In that case, there could be an ABC up, but then an ABC down or 5 wave pattern down to complete wave C (red) of wave 4’ (purple).

6. The uptrend remains valid as long as price action remains above the 50% Fib. A break below it places the uptrend on hold (yellow) whereas a strong retracement invalidates it (red).

On the lower 4 hour chart, we can see signs that the bearish price swing is completed. A wave 5 pattern in wave 5 seems to finish the bearish push:

1. The wave 2 (pink) did not break the bottom of wave 1 (pink).

2. The current bullish swing could there be a wave 3 (pink). 

3. The alternative is an ABC (grey) pattern rather than a 123.

4. The bullish channel (green) is key for the wave 3 (pink). Price action should stay in the channel.

5. An immediate push (green arrows) up towards the -61.8% Fibonacci target is likely. But price action needs to break above the 610 ema.

6. A pullback could find support at the 144-233 ema zone.

7. A bearish bounce (orange arrows) at that target should take price action back to the channel bottom and 21 ema zone. This zone should act as support and bounce (green arrows).

8. The main wave 3 target is the -161.8% Fibonacci target (blue box).

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The analysis has been done with the ecs.SWAT method and ebook.