- Gold now appears to have formed a symmetrical triangle on short-term charts.
- Neutral technical indicators warrant caution before placing directional bets.
Gold extended its consolidation sideways movements during the early North American session and remained confined in the tight trading range, around $ 1,900.
Looking at the technical landscape, the XAU / USD has been oscillating between two converging trend lines for the last month or so. Range-limited trading action constitutes the formation of a symmetrical triangle on short-term charts.
The symmetrical triangle, although it could be classified as a bearish continuation, marks indecision about the short-term trajectory of the precious metal. Furthermore, the neutral oscillators on the 4-hour / day charts have not supported any firm short-term direction.
Therefore, the direction of the next major move can only be determined after a valid breakout. This, in turn, warrants some caution for aggressive traders and points to an extension of moderate trading action amid a combination of divergent forces.
A weaker tone around the US dollar could continue to provide some support for dollar-denominated commodities. However, signs of a strong opening in the US equity markets could undermine the XAU / USD as a safe haven and any attempt at a positive move.
Meanwhile, immediate resistance is pegged near the $ 1917-18 region, which if decisively cleared could be seen as a new trigger for bull traders. Gold could then aim to overcome the intermediate hurdle of $ 1,932 and test the supply zone of $ 1,950-55.
On the contrary, a convincing break below the triangle support, currently near the $ 1,895 region, now appears to accelerate the decline towards the horizontal support at $ 1,874-72. Subsequent weakness has the potential to drag XAU / USD toward September’s monthly lows, around the $ 1850-48 region.
4 hour chart
Credits: Forex Street
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