XAU/USD appears vulnerable
|As the US dollar continues to find grip at higher levels—underpinned by a rally in US government yields—the price of spot gold (XAU/USD) is in relatively deep water.
Higher-timeframe picture shows Gold approaching support
Medium-term price action on the daily chart exhibits scope to extend losses. The longer-term ascending channel is interesting (drawn from $1,641 and $1,959). Note that price action FAILED to touch gloves with the upper boundary in recent trading, pencilling in highs just ahead of the all-time high of $2,075. This tells me that sellers are more active at this point, a bearish vibe that was further emphasised through not only negative divergence out of the Relative Strength Index (RSI), but also price action taking out the lower boundary of a local ascending channel (taken from $2,009 and $1,934) and subsequently pursuing ground south of the 50-day simple moving average at $1,992. Furthermore, note that the RSI is cementing position under the 50.00 centreline (negative momentum) and shows room to press lower.
The current position of price will also likely draw more attention to the yellow metal, as the longer-term channel support is poised to welcome gold. Should sellers continue to command control and tunnel lower here, support at $1,919 could be challenged (a level braced by additional Fibonacci support [61.8%] at $1,905). If price manoeuvres under the aforementioned support zone, we could see the unit take aim as far south as the 200-day simple moving average at $1,829.
Daily chart
Short-term support breach?
While the bigger picture (daily chart) displays room to push lower, H1 support at $1,945 is vulnerable. Overhead resistance at $1,955 remains on the radar, but the zone surrounding the base (often recommended to draw support/resistance as a zone rather than a defined price point) has been tested.
Therefore, a decisive H1 close south of current support could encourage breakout selling, targeting the longer-term daily channel support noted above.
H1 chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.