- Gold gained some positive traction on Thursday, although it lacked a strong following.
- The recent bounce along an ascending channel constitutes the formation of a bearish pennant.
- A sustained break below the 200-day SMA is needed to confirm a further bearish breakout..
The oro it traded with a positive bias for most of the European trading session, although it lacked strong follow-up buying. The precious metal last traded just below the $ 1,815 level, up around 0.30% on the day.
The recent bounce from near the very important 200-day SMA around $ 1,800 has occurred along an upward sloping channel. Given the recent sharp decline, the aforementioned channel constitutes the formation of a bearish flag pattern.
The negative setup is reinforced by the bearish technical indicators on the daily chart. This, coupled with the fact that the oscillators on the hourly charts have recovered from oversold territory, supports the prospects for further weakness. With that said, bearish traders could expect a sustained advance at the pennant support, around $ 1,805.
A subsequent dip below the 200-day SMA, currently near the $ 1,798 region, will be seen as a new trigger for bearish traders. The XAU / USD could accelerate the downward trajectory towards the $ 1,763 region. The latter marks the 50% Fibonacci level of the positive move from $ 1,451 to $ 2,075, which should act as a solid base and help limit the decline.
On the other hand, some tracking force beyond the trend channel resistance, currently near the $ 1,820 region, could trigger some short covering move. However, the recovery attempt could still be seen as a selling opportunity and risks quickly disappearing. This, in turn, should limit the XAU / USD near the $ 1,835 region (Fibonacci level of 38.2%).
4 hour chart
Additional technical levels
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