|

Gold Price Analysis: XAU/USD bears seek discount for $1,825/34/oz targets

  • The US dollar has driven prices in the precious metals market lower.
  • The move in gold gives rise to a potential sell limit trade setup offering 1:3 risk to reward ratio. 

Gold prices have fallen below a daily support structure like a knife through butter.

The price has met what appears to be a supporting trendline and prior structure. With a focus on the downside, bears should be looking for a discount from which to enter a swing-trading position. 

The following is a top-down analysis that illustrates how an optimal entry point can be found on the daily and 4-hour time frame to target the 1825/34 area. 

Monthly bearish correction to a 38.2% Fib retracement

Following months of upside, the market is finally correcting as investors pull their bids and take profit before the next presumed reflation-fuelled-rally subsequent of a large-scale fiscal deal from the White House.

However, in the meantime, there is still room to the downside if the following Fibonacci and wave analysis is correct.

Weekly impulse in the making 

The weekly chart shows that the bears have taken over at resistance and the price would be expected to drop to at least a 38.2% Fibonacci retracement of the monthly rally. 

This would equate to the third wave of the recent drop (wave 1) and correction to a 61.6% Fib (wave 2). 

Daily chart/new resistance

The daily chart shows that the price has been rejected at the weekly resistance and the 61.8% Fibonacci confluence. 

Given the weekly and monthly bearish outlooks and the firm resistance, the focus is on the downside towards the monthly 38.2% Fib target. 

However, to improve the entry and risk to reward ratio, bears would be prudent to wait for a re-test of the nearest and last formed structure.

If the US dollar corrects lower, gold would be expected to pick up some bucks along the way to the structure. 

DXY Reverse H&S in the making

The following chart shows that the DXY could be in the process of forming a reverse head and shoulders. 

In doing so, the dollar needs to correct lower which would rhyme with the prospects of gold to retest the aforementioned structure for a discount to sell on a limit order:

Sell limit setup, 1:3 R/R

The above scenario illustrates how a sell limit order placed strategically at prior support, expected to act as resistance, offers a discount in seeking out a profit target in the 1825/34 area. 

This particular setup offers a 1:3 risk to reward ratio with the stop loss placed above the structure. 

The stop loss can be moved to breakeven as soon as new resistance structure is formed on the 4-hour chart on the way towards the monthly target area. 

in further analysis, the price may not make it all the way to the sell limit. 

There are structure and confluence with a 38.2% Fib from where a sell limit can be placed lower down.

The combination of the two sell limits can be applied for an average if the market moves beyond the 38.2% Fib and depending on how committed bears are to the downside:

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Editor's Picks

EUR/USD slumps below 1.1750 as USD benefits from risk-aversion

EUR/USD comes under renewed bearish pressure in the European session and trades below 1.1750 following a recovery attempt earlier in the day. The US Dollar gathers strength and weighs on the pair as investors seek refuge in the wake of Israel and the United States' joint attack on Iran.

GBP/USD targets 1.3500 barrier near moving averages

GBP/USD rebounds from the daily losses, trading around 1.3450 during the Asian hours on Monday. The technical analysis of the daily chart indicates an ongoing bearish bias, as the pair trades within a descending channel pattern.

Gold surges on safe-haven demand, rises above $5,400

Gold benefits from intense risk-aversion on Monday and climbs above $5,400, setting a fresh monthly-high in the process. Tensions in the Middle East remain high as Israel and Hezbollah continue to exchange strikes following the US-Israel joint attack on Iran over the weekend.

Bitcoin, Ethereum and Ripple under pressure as key supports face breakdown risk

Bitcoin, Ethereum, and Ripple prices trade on the back foot at the start of this week on Monday, after extending losses in the previous week. BTC is on the brink of a breakdown, ETH is capped below key resistance, and XRP risks a crack of the trendline.

The market is paying for insurance, not apocalypse

As expected, this morning felt less like a Monday market open and more like a fire drill. Futures screens flickered red. S&P contracts down almost 1%. Nasdaq off 1.2%. Brent leaped 13% through $80. Gold rose 1.6% toward $5350 before paring some gains. The dollar is strutting mildly. The Swiss franc is quietly doing what it always does in a storm, catching some safe-haven flows.

Pi Network Price Forecast: Core team offloads supply, weighing on PI recovery

Pi Network  hovers below $0.1700, broadly steady at press time on Monday, attempting a recovery after a 2% loss the previous day. Sunday’s decline aligned with nearly 49 million PI tokens offloaded by the Pi Foundation, implying a spike in supply pressure that capped the prevailing four-day recovery.