XAU/USD traded lower on Tuesday but hit support slightly above the 1475 zone and today, it rebounded somewhat. Overall, the precious metal is trading below the downside resistance line drawn from the high of September 4th, which keeps the near-term outlook somewhat negative, but we prefer to wait for a clear dip below 1475 before we get confident with regards to a decent round of selling.
The current rebound may continue for a while, perhaps for the price to test the 1489 zone, or the 1497 barrier, which provided decent resistance on Monday and yesterday. That said, given that it would still be trading below the aforementioned downside line, we would see decent chances for the bears to jump back into the action and push for another test near the 1475/77 zone. If they prove strong enough to overcome that zone, such a break may carry larger bearish implications, perhaps setting the stage for the low of October 1st, at around 1459.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, while the MACD stands below both its zero and trigger lines. Both indicators suggest negative momentum, but the fact that the RSI is pointing somewhat north adds to our view that some further recovery may be looming before the next negative leg.
In order to start examining whether the short-term picture has turned to positive, we would like to see, not only a break above the downside resistance line, but also a decisive break above 1517, a zone that acted as a strong resistance on October 3rd and 9th. Such a move could initially target the 1528 zone, the break of which may extend the recovery towards the 1536 zone, marked by the peak of September 24th, and near the inside swing low of September 4th.
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