- Gold edged higher on Monday, albeit remains confined in a familiar trading range.
- The recent price action seemed to constitute the formation of a descending triangle.
- Sustained move beyond $1970 is needed to negate any near-term bearish outlook.
Gold extended its sideways consolidative price action and remained confined in a range below the $1950 level through the mid-European session on Monday.
The downside remains cushioned near the $1940 confluence region – comprising of 200-hour SMA and the 38.2% Fibonacci level of the $2075-$1863 corrective fall. The mentioned level should act as a key pivotal point for intraday traders.
The commodity has been attracting some dip-buying ahead of the $1900 mark over the past one month or so. However, any attempted positive move remains capped near a resistance marked by a one-month-old downward sloping trend-line.
The combination of horizontal support and trend-line resistance constitute the formation of a descending triangle on short-term charts. The descending triangle is a bearish set-up that forms during a downtrend as a continuation pattern.
Meanwhile, neutral technical indicators on hourly/daily charts haven't been supportive of any firm direction. This makes it prudent to wait for a sustained break through the triangle before positioning for the next leg of a directional move.
Bearish traders are likely to wait for a convincing break through the $1910-05 horizontal support, below which gold is likely to slide back towards the August monthly swing lows, around the $1863 region.
Conversely, a sustained strength beyond the $1970 level (50% Fibo. level and descending trend-line) will be seen as a fresh trigger for bullish traders. XAU/USD might then aim to reclaim the key $2000 psychological mark and climb further towards the $2016-17 resistance zone.
Gold 1-hourly chart
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Technical levels to watch
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