By breaking the previous low, Gold seems to confirm further price weakness. It is unlikely that there will be any strong pullbacks after such a fast price drop in the past few hours. Therefore, any small pullbacks could be of great interest in terms of selling opportunity.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
XAU/USD symbol
Type: Bearish
Key support levels: 1690, 1670
Key resistance levels: 1717, 1735
Price Action: On the Daily chart, XAU/USD has formed a double top after which price broke below the downtrend trendline. Such price action might suggest that the selling pressure is increasing and the price is very likely to continue trending down. The previous level of resistance as well as support is seen near the 1670 area. It also corresponds to the 88.6% Fibs, applied to the last strong correction.
On the 30-minute chart, Gold continues to produce lower lows and lower highs, confirming the validity of the downtrend. Besides, the price remains below the downtrend trendline and 200 Exponential and Simple Moving Averages. The recent break below the 1717 support just increases the selling pressure and could be the price area of interest for the sellers.
Potential Trade Idea: it is suggested to wait until the price retracement towards 1714 – 1717 area consolidates in order to consider shorting Gold. The price is expected to continue trending down within the next 24 hours, after rejecting the previous level of support as well as the downtrend trendline. The downside target is located at 1670, which is a potential $45 decline. If the price manages to break above 200 MAs on the 30M chart, it will clearly be the exit signal, and therefore stop loss can be placed at 1736.
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