Gold Short-term Outlook: XAU/USD Breaks Below Support, Bulls Poised

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

Gold prices mark second weekly decline after reversing off trend resistance
XAU/USD break of technical support threatens test of November uptrend- Fed on tap
Resistance 3272/88, 3320 (key), 3381- Support ~3180s, 3131/32 (key), 3018

Gold prices are poised to close a second consecutive weekly decline with XAU/USD falling more than 8.5% from last month’s record high. A break below slope support this week threatens a deeper correction within the uptrend with the bulls eyeing support ahead of next week’s FOMC meeting. Battle lines drawn on the short-term gold 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: Gold prices have been trading within the confines of an ascending pitchfork extending off the late-December low with XAU/USD reversing off the upper parallel last month. The subsequent pullback broke below the median-line yesterday at the 23.6% retracement of the November advance at 3272 and threatens a deeper pullback in the days ahead.

Gold Price Chart – XAU/USD 240min

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

Notes: A closer look at gold price action shows XAU/USD breaking the weekly opening-range on Wednesday with price trading just below the median-line on the heels of today’s NFP release. Initial support rests with the highlighted slope confluence near ~3180 and is backed by 3131/32- a region defined by the 100% extension of the April decline and the 38.2% retracement of the November advance. Ultimately, a break / close below pitchfork support would be needed to invalidate the November uptrend / suggest a larger reversal is underway.

Initial resistance extends in the objective weekly open at 3272/88 with a close above the weekly open at 3320 needed to suggest a more significant low is in place. Subsequent resistance objectives are eyed at the record high-day close (HDC) at 3381 and the record high-close at 3424- look for a larger reaction there IF reached.

Bottom line: Gold has slipped below uptrend support for the first time since the April breakout and threatens a deeper correction while below the median-line. From a trading standpoint, losses should be limited to 3131 / the lower parallel IF price is heading higher on this stretch with a close above 3319 needed to fuel another attempt at the highs.

Keep in mind we in the early throws of the May opening-range with the Federal Reserve interest rate decision on tap next week. Stay nimble into the release and watch the weekly close here for guidance.

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

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