Gold Plunge Halted at Support- Bulls Face FOMC

Gold Technical Price Outlook: XAU/USD Weekly Trade Levels

Gold prices are up nearly 1% this week XAU/USD attempting to snap a three-week losing streak after rebounding from technical support. The recovery may be short-lived however with the broader risk still weighted to the downside heading into FOMC next week. These are the updated targets and invalidation levels that matter on the gold weekly charts into the close of the month. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

Gold Price Chart – XAU/USD Weekly

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Notes: In last month’s Gold Weekly PriceOutlook we noted that XAU/USD had, “broken below a critical support confluence we’ve been tracking for months now and the risk remains for further losses while below this threshold in the weeks ahead.” The zone in focus was 1763/67- a region defined by the 50% retracement of the 2020 range and the 61.8% extension of the August decline. A weekly close below into the close of February kept the focus on confluence support at, “the 38.2% Fibonacci retracement of the of the 2015 advance / 61.8% retracement of the 2020 range at 1682/89.” Gold briefly registered a low at 1767 this week before rebounding higher – so what now?

Initial resistance stands at the objective monthly open at 1734 backed closely by 1763/67. Ultimately a breach above the highlighted trendline confluence near ~1800 would be needed to shift the broader focus higher again in price. A break lower from here exposes a more significant support zone at the 100% extension at 1649– an area of interest for possible downside exhaustion IF reached.

Bottom line: The gold price breakdown has now responded to the first major hurdle at confluence Fibonacci support. From at trading standpoint, look for topside exhaustion ahead if 1767 IF price is indeed heading lower with a break of the weekly lows exposing broader uptrend support into 1649. Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trading levels. Keep in mind the FOMC interest rate decision is on tap next week with markets eagerly anticipating updated quarterly projections as they pertain to growth, employment and inflation- stay nimble and expect volatility.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment – XAU/USD Price Chart

• A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +6.60 (86.85% of traders are long) – typically bearishreading
• Long positions are2.74% higher than yesterday and 4.16% higher from last week
• Short positions are19.77% lower than yesterday and 7.65% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Gold-bearish contrarian trading bias from a sentiment standpoint.

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Previous Weekly Technical Charts

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex