Gold Short-term Outlook: XAU/USD Bulls Feel the Heat- Support In View

Gold Technical Outlook: XAU/USD Short-term Trade Levels

• Gold prices plunge more than 2% off July high- breakout faces first major test
• XAU/USD risk for downside exhaustion / price inflection into key support levels
• Resistance 1959, 1965, 1982– support 1937, 1924/29, 1903/10 (critical)

Gold prices are threatening to snap a four-week winning streak with the XAU/USD breakout now eyeing the first major test. The battle-lines are drawn heading into August and we’re on the lookout for a possible exhaustion low in the weeks ahead. These are the updated targets and invalidation levels that matter on the XAU/USD short-term technical charts.

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Gold Price Chart – XAU/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Technical Outlook: In last month’s Gold Short-term Price Outlook we noted that XAU/USD was, “testing confluent technical support into the monthly opening-range with major event-risk on tap tomorrow- risk for significant price inflection here.” The support zone in focus was, “at 1903/10- a region defined by the 38.2% retracement of the 2022 advance and the 61.8% Fibonacci retracement of the objective yearly range. Note that this threshold converges on the November channel line and further highlights its technical significance.”

Gold registered an intraday low at 1902 that day before rebounding sharply with a breakout of the July opening-range / a multi-month downtrend days later, fueling a rally of nearly 5% off the June lows. Price has pulled back more than 2.2% off those highs with the decline taking gold into a cluster of key support zones – we’re looking for possible downside exhaustion into one of these levels.  

Gold Price Chart – XAU/USD 120min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Notes: A closer look at gold price action shows XAU/USD trading within the confines of a proposed descending pitchfork formation extending off the July highs. A break below the median-line here exposes the 1937 pivot zone backed by the 1.618% projection of the July decline and the 61.8% Fibonacci retracement of the late-June rally at 1924/29- both levels of interest for possible downside exhaustion IF reached. Ultimately a break / close below 1903/10 would once again be needed to suggest a larger trend reversal is underway.

 Weekly open resistance is eyed at 1959 backed by the objective August open at 1965- a breach / close above this threshold would mark resumption of the broader uptrend towards subsequent objectives at 1982 and key resistance at 2004/09- look for a larger reaction there IF reached.

Bottom line: Gold prices are approaching key support zones which will need to hold for the July breakout to remain viable. From a trading standpoint, we’re on the lookout for an exhaustion low heading into August - losses should be limited to 1924 IF price is heading higher with a close above the monthly open needed to mark resumption. Review my latest Gold Weekly Technical Forecast for a longer-term look at the XAU/USD trade levels.  

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex