Spot gold prices took a breather after hitting new record highs earlier this week.
Is the commodity ready to extend its upward trend after falling to the technical support area?
The 4-hour daily chart might give us some clues!
Gold (XAU/USD) 4 hours Chart by TradingView
If you missed yesterday’s market action, you should know that the US dollar saw buying pressure as some traders priced in poorer US reports that signaled a weaker labor market. Other traders took profits in case FOMC Chairman Powell’s speech later today turns out to be more hawkish than analysts were expecting.
Spot gold, which turned lower from record highs of $2,530, bottomed out near $2,470 before seeing bullish reversal candles and somewhat sustained buying pressure.
Does this mean that the XAU/USD pair is ready to extend its uptrend that started in August?
Remember that directional biases and volatility in market prices are usually driven by fundamental factors. If you haven’t done your homework on gold and market sentiment, it’s time to take a look at the economic calendar and stay up to date with daily fundamental news!
Note that the XAU/USD pair rose at the 61.8% Fibonacci retracement level, which coincidentally falls near a previous resistance area and trend line support that has been strong since the beginning of the month.
If the XAU/USD pair records a few more bullish candles, we could see a technical retracement from the 50% Fibonacci area and the pivot point. The pair could attract more buyers who could continue to rise until the turning point at $2,515 or the previous high at $2,530.
However, if the demand for the US dollar gains momentum, the XAU/USD pair could extend its current decline. Look for bearish candles and continued trading below the trend line and the previous resistance area at $2475, which could lead to a revisit of the previous turning points at $2450 or $2440.
Good luck and happy trading with this setup!
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