For the past 2 weeks, gold price has been ranging between roughly 1306 and 1325. As you can see in the 4H chart, this consolidation range followed a bullish push from roughly 1241 to 1325.
1) The RSI reflects strong and persistent bullish momentum as it popped above 80 and held above 40 on dips. If the 4H RSI were to fall below 40, we are likely to be seeing some consolidation/correction.
2) The 200-, 100-, 50- moving averages in the 4H chart have positive slope and are in bullish alignment.
3) As we begin the 7/1 Asian session, price broke above the 2-week range, signaling bullish continuation.
Gold (XAU/USD) Daily Chart, 7/1
When you look at the daily chart, you can see that the range breakout is immediately being challenged by the April resistance around 1331. Once this level is cleared, the 2014-high around 1388 will be exposed.
If the daily RSI reading being above 70 scares you, it means you are keen to overbought conditions, which can align you to consolidation markets. However, if the gold market is turning bullish, don’t expect such a deep pullback. If you look at this year’s February-March price action and the daily RSI, you can see that dips were brief, and the RSI always stayed above 60, and continued pop above the 70.
The fact that the June low establishes a significant low that is above the 2014-low should also bring in more buyers. For now however, let’s limit the bullish outlook to around 1380.
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