Gold (XAU/USD) struggles for direction and remains confined in a range. In the view of FXStreet’s Haresh Menghani, the formation of a rectangle warrants caution before placing directional bets.
See – Gold Price Analysis: XAU/USD rallies seen as corrective while below $1765 – Commerzbank
Key quotes
“Market participants now look forward to the US economic docket, highlighting the release of the final US GDP print for the fourth quarter of 2020. This, along with a bombardment of Fed speak and the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment for some short-term momentum play.”
“From a technical perspective, the recent range-bound price action constitutes the formation of a rectangle on hourly charts. The rectangle might still be categorized as a bearish continuation pattern that marks a brief pause in the trend.”
“The negative outlook is reinforced by the fact that the commodity has repeatedly struggled to find acceptance above the $1742-44 supply zone. That said, it will still be prudent to wait for a sustained move in either direction before placing any aggressive bets.”
“The lower boundary of the trading range, around the $1720 region might continue to act as immediate support. A convincing break below will be seen as a fresh trigger for bearish traders and turn the commodity vulnerable to accelerate the slide towards the $1700 mark.”
“The $1742-44 region remains a strong hurdle for bullish traders. A sustained strength beyond, leading to a subsequent breakthrough the trading range resistance, around the $1748 level, might prompt some short-covering move and push the XAU/USD back towards the $1760-65 strong horizontal support breakpoint.”
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