XAU/USD traded higher yesterday, breaking above the peak of March 9th, at 1704, that way reaching a new 8-year high. The precious metal has been printing higher highs and higher lows above an upside support line taken from the low of March 19th, while since April 2nd, it’s been trading above all three of our moving averages on the 4-hour chart. In our view, these technical signs paint a positive near-term picture.
If the bulls are willing to stay in the driver’s seat, we would expect them to climb towards the 1755 territory, defined as a resistance by the highest point of November 2012. If they are strong enough to overcome that obstacle as well, then we may see them putting the 1795 zone on their radars. That zone marks the peak of September 2012.
Shifting attention to our short-term oscillators, we see that the RSI, already above 70, hit support near that mark and turned up again. The MACD lies above both its zero and trigger lines, but currently points sideways. Both indicators detect upside momentum but the flattening of the MACD makes us careful with regards to a possible pullback soon, perhaps after the price challenges the 1755 area.
In order to start examining the case of a trend reversal though, we would like to wait for a decisive dip below the 1672 barrier, defined as a support by the inside swing highs of March 11th and April 7th. Such a move could initially open the path towards the low of April 8th, at around 1641, the break of which could carry more bearish implications, perhaps setting the stage for the 1605 hurdle, marked by the low of April 3rd.
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