XAUUSD: Signals of Bearish Continuation from Breakdown and Retest

Market Overview

XAUUSD has been moving within a clearly defined consolidation range, where the price has remained somewhat stagnant for extended periods. This suggests a balance between buyers and sellers, alongside a gradual gathering of liquidity. Eventually, this range breakout shifted upwards, leading to a notable bullish rally. Following this breakout, gold surged sharply, signaling strong bullish sentiment and attracting momentum buyers. However, as the price climbed close to the peak, the bullish energy started to wane, resulting in the formation of a distinct swing top.

At present, XAUUSD is trading beneath an essential resistance area around 4,950. This level used to act as support but has now switched roles. Multiple attempts to break above this zone have failed, indicating a lack of acceptance and a robust presence of sellers. Additionally, the price recently dipped below the support of a descending triangle and is now attempting a weak rebound towards the broken structure, reflecting a typical bearish retest scenario.

My Analysis and Strategy

In my view, the scenario leans towards a short-term continuation as long as prices remain beneath the descending triangle resistance line and the 4,950 resistance zone. The latest attempt to break above these levels seems to be more of a corrective movement driven by liquidity, rather than a sign of a trend reversal. As long as these levels hold, the current rally can be seen more as a selling opportunity than a bullish continuation. Structurally, the market seems to be transitioning from a bullish expansion phase into a wider correction or distribution phase. The presence of falling highs and repeated failures at resistance backs up the bearish perspective. The first target on the downside is around the 4,790 support area, which is a significant demand region and a previous breakout level. This area might serve as a focal point where buyers could step in.

If the price touches this support zone and displays a strong rebound or consolidation, a temporary upswing might be on the cards. However, if a clear breakdown occurs and the price stays below 4,790, it would signal ongoing weakness and could lead to an even deeper decline into lower demand zones. The short bias is justified as long as prices remain below resistance and the downside structure holds. A decisive breakout and acceptance above the triangle resistance and the 4,950 area would negate the short scenario, shifting focus back to a bullish continuation. Until that happens, the situation still favors sellers.