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XAU / USD remains confined to a range above the 100 hourly SMA

  • Gold struggled for a firm direction and remained confined to a range on Wednesday.
  • Moderate price action forms a rectangle on the 1-hour chart.
  • A mixed technique setup warrants some caution before placing new directional bets.

Gold extended its sideways price consolidation movements throughout the mid-European session and remained confined to a tight trading range, around the $ 1,745 region.

A generally positive tone in the equity markets did not help the XAU / USD as a safe haven to capitalize on the good bounce the day before from the $ 1,724 area, or during the one-week lows. Aside from this, a modest rally in US Treasury yields further contributed to limiting gains from the underperforming yellow metal.

Meanwhile, the US dollar languished near three-week lows, which, in turn, extended some support to the dollar-denominated commodity and helped limit any significant declines. Investors also seemed reluctant to make aggressive bets, preferring to wait for further clues from Fed Chairman Jerome Powell’s scheduled speech later this Wednesday.

From a technical perspective, price action within the range constitutes the formation of a rectangle on the 1-hour chart. This marks a brief consolidation before the next leg of a directional move. Bullish technical indicators on the hourly / daily charts support the prospects for an eventual break to the upside and a further short-term appreciation move.

Meanwhile, the XAU / USD, so far, has struggled to break the immediate resistance at $ 1,750. This makes it prudent to wait for a sustained breakout in either direction before placing aggressive bets. A sustained move beyond the mentioned barrier should pave the way for a move towards a previous strong support breakout point, around the $ 1,760-65 region.

On the other hand, immediate support is now pegged at the $ 1,740 area. This coincides with the lower limit of the intraday trading range, which if decisively broken will nullify any positive short-term bias and trigger some technical selling. The XAU / USD could accelerate the decline towards the challenge of the $ 1,720 support zone.

Some follow-up selling would expose the $ 1,700 level, below which bears could point towards challenging the double-bottom support near the $ 1,677-76 region, or multi-month lows touched in March.

Technical levels

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