Gold (XAU/USD) Threatens Triangle Resistance, Again

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Gold (XAU/USD) - Threatens Triangle Resistance, Again

Gold (XAU/USD) has been trading in a symmetric triangle seen in the 4H chart.

This triangle reflects consolidation/congestion after a couple of bearish swings from 1392 (2014-high) to 1268.50. The clustering of the moving averages (200,100,50) also reflect a market without direction in this time-frame.

4H chart:
gold trading in triangle pattern

Fundamental Factors:
Yesterday’s FOMC meeting minutes softened the USD, and gold bounced off the triangle support.

As we get into the 5/21 US session, the key event risk is a geopolitical one – Ukraine crisis, where tension and violence remains elevated, and an election is pending for May 25. Risk aversion often has a bullish effect on gold.

Technical Factors:

Daily Chart:
gold daily chart 5/22

Bullish scenario:
At 1300, gold is just below triangle resistance. A break above 1310 might be a clear indication of a breakout, which opens up 1331. If the market can then stay north of 1300 on a subsequent pullback, there would be increased upside risk towards the 1392, 2014-high.

Bearish scenario:
However, failure to break above 1331, with a return below 1300 keeps the market sideways-bearish, putting focus first back to the 1268.50 low. A break below that has
1) a support/resistance pivot area at 1220,
2) the 1200 psychological level,
3) and the 2014-low at 1183 in sight.

A false breakout scenario would be as follows: Price breaks 1268, but finds support around 1260 around the 61.8% retracement. Then price pops up above 1300.

Earlier Today: AUD/USD Trading Off Key Support Near 0.92

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.