Testing previous trend support as resistance
Notice that from Monday to Wednesday of this week, the line was near the resistance of the day's high. Therefore, if the bearish trigger from Wednesday is a follow-through to the downside, gold could see resistance near the 20-day moving average and then turn lower.
The lower target level below this week's low begins at the 78.6% retracement of 2,576, which is not far below this week. However, if the price continues to fall, the recent swing low of 2,537 could be tested as support. Looking at the developing downtrend channel, we can see that the risk of the 2,537 price level going down is increasing. If that happens, the next target zone below 2,537 will be the price range around 2,475 to 2,473.
Sustained bearishness could ultimately lead to $2,575
There are some signs that point to that price range. The descending ABCD pattern (purple) reaches its initial downside target of 2,475. This is where there is symmetry in price between the two bars and therefore could be a pivot level. The 61.8% Fibonacci retracement is 2,473. Additionally, this price zone started from the swing high in July and was shown as both support and resistance earlier this year.
Sentiment changes when weekly high of 2,664 is exceeded
Despite the possibility of a continued bear market, a rally above this week's high of $2,664 could start to change the outlook. If this happens, gold will move above the 20-day moving average and trend line. On the weekly chart (not shown), it is interesting to note that gold fell below its 20-week moving average this week, but is set to close above it today. This means the 20-week moving average is showing support again, which is bullish on the larger time frame. Nevertheless, price trends and patterns provide clues.
Check out our news for all today's economic events. economic calendar.
