Gold Trading Against 1200 and a Falling Channel Resistance

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Gold Trading Against 1200 and a Falling Channel Resistance

A look at the 4H Gold chart shows that gold rallied at the end of November from 1142.83 up to 1238.25. Then it began to retreat until last week when it found support at 1170.62.

Gold (XAU/USD) 4H Chart 12/29
gold 4h chart 12/29
(click to enlarge)

Channel Resistance: Since finding support, gold price rallied to end the week but stalled just under 1200. Note that price also respected a falling channel resistance. Also, after tagging 30, the RSI has remained below 60 for the most part, which reflects maintenance of the bearish momentum we have seen in the second half of December.

Neutral Market: The 4H chart shows that the overall medium-term mode has been sideways and price is essentially at the “equilibrium” or “fair-price” level as it trades in the middle of the cluster moving averages. We can also say that 1190 is the middle of the latest range, and price is therefore neutral as it trades around this “central pivot”.

When we look at the daily chart, we can see that even though price has been neutral since late October, the trend mode since July is still considered bearish.

Gold (XAU/USD) Daily Chart 12/29
gold daily chart 12/29
(click to enlarge)

Bulls Held Back: The fact that price held below 1240 in December showed a failure to shift into a more bullish mode. Currently, price is trading under the 200-, 100-, and 50-day SMAs, while the RSI held below 60. These are all signs that the bullish outlook was kept at bay.

Bullish Clue: However, if gold rallies above 1200 and the channel we saw in the 4H chart, it could be a sign that there is a bullish outlook ahead even though some indicators do not reflect this. If we only look at price action, we can say that there is indeed a bullish development because price has been making higher highs and higher lows since the 1130 low on the year.

A break above 1220 would clear the falling trendline and the 100-day SMA and would be an even stronger clue of a bullish reversal, or at least an extension of the current bullish correction towards the 1255 October-high.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.