XAU/USD looks very interesting for swing players out there as the recent bounce retests several technical arguments, including a head and shoulders neckline break!
Let’s check out potential patterns to watch out for that bull and bears can use to compliment fundamental analysis done on gold!
XAU/USD (Gold): 4-Hour
XAU/USD 4-Hour Chart by TradingView
Fundamentals will almost always determine directional biases and volatility conditions, and if you don’t have a fundamental based price outlook for gold, go do your homework now by checking out the forex calendar and catching up on daily fundamental news!
Now, if you’ve already done your homework and you have an expectations of gold falling and/or the U.S. strengthening, then you’re in luck because there are several technical arguments signaling that technical bears are already back in control.
On the 4-hour chart above, we can see a head and shoulders pattern recently formed at the end of October and into November, with the neckline area some where around the $1,975 handle.
The neckline was broken last week, followed by a swift move lower to nearly retest the 200 simple moving average before buyers jumped in and took control. These were pretty wild moves, and to learn the drivers for both the USD bullish run followed by the bounce in XAU/USD, check out our latest FX Weekly and Global Market Recaps.
Gold made it’s way back to the broken neckline this week, only to find sellers ready and waiting to take back control. It’s possible Fibonacci and Moving average players were waiting as well as the 61% Fib level correlates with the neckline and 100 simple moving average.
With a technical bearish reversal signal likely confirmed for now, those with bearish fundamental biases should consider moving gold from watchlist to risk management planning, again if there is strong conviction of a future move lower.
And based on the daily average true range of around $23/day, a return to the recent swing lows around $1,933 is a possibility this week if bearish moment picks up.
For the fundamental bulls on gold, the same technical arguments above is the area to watch for a sustained upside break before considering moving gold from watchlist to working on a long risk management plan.
A break there could draw in longer-term technical bulls given the strong rally since testing $1,825 back in October, and potentially push the market to restest the $2,000.00 major psychological handle this week or next.
So, those are two simple technical patterns to watch out for before considering a risk management strategy, but what are your thoughts on gold? Are you leaning bullish or bearish?
We love to hear everyone’s ideas so feel free to drop a comment below and share your thoughts!