Gold (XAU/USD) Retreats to Challenge June’s Trendline Support

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Gold (XAU/USD) Retreats to Challenge June's Trendline Support

In June so far, gold (xau/usd) has found support at 1240.50. After putting in a price bottom, traders bought gold up to 1285 today before price retreated.

XAU/USD 4H chart 6/16
gold 6/16 4h chart

Trendline, bearish continuation: As gold rallied this month, it approached the apex of a previously broken triangle, which would be in the 1290-1300 area. At 1285, traders also saw a trendline resistance extending from a previous triangle. The decline looks just as strong as the bullish price action it is going against, but overall price action is still bullish as gold trades above June’s rising trendline. A clean break below 1270 could clear this trendline, and signal bearish continuation at least toward 1250, 1240.

Trading implications:
If price is supported above 1270, there could still be some upside risk toward the 1290-1300 area, but for short-term traders this would be very little potential reward unless they believe gold has turned bullish. I think a break above 1300 could give the bullish outlook some weight, but for now, the short to medium term mode is still bearish. Therefore, with a bearish outlook, a trader can wait for a price closer to 1300 to fade, or if price breaks below 1270, the trader can either trade into the bearish breakout, or wait for a pullback and short at a price below the 1285 high.

Sideways Market:
When you look at the daily chart, you do not see any clear direction. While 2014 was bullish going roughly from 1183 to 1388, the 2013 gold market was bearish, with price falling from 1700 to below 1200.

XAU/USD daily chart 6/16
xauusd 6/16 daily chart

Price is now right in the middle of the 2014 range, and one has to question whether 2014 price action is a new primary move or just a secondary move to the prevailing primary bearish move. I would side on the bearish outlook until the market shows ability to push above 1300. In the bearish outlook, the 1182.35 low on the year would be in sight, but let’s limit it first to 1200.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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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.