XAU/USD traded higher today and managed to challenge the 1733 barrier, marked as a resistance by Tuesday’s high. Having said that though, the broader picture suggests that the precious metal is trading within a triangle formation since last Thursday, and thus, until it exits the pattern, we prefer to stay sidelined.
If the recovery continues and the price breaks above yesterday’s high of 1737, this may also signal the upside exit out of the triangle. More bulls may wake up then, and perhaps target the peak of last Thursday, at around 1745. That level provided resistance on June 2nd as well. If the bears are nowhere in sight near that level, the bulls may help gold continue climbing higher, aiming for the 1754 zone, marked by the high of May 20th. Another break, above 1754, may set the stage for extensions towards the peak of May 18th, at around 1765.
Looking at our sort-term oscillators on the 4-hour chart, we see that the RSI is standing above 50 and points somewhat up, while the MACD lies fractionally above both its zero and trigger lines. Both indicators point to some upside momentum, but as we already noted, we prefer to wait for the exit out of the triangle before we get confident on gold’s forthcoming directional move.
On the downside, even if the precious metal overcomes the lower end of the triangle, the move that could carry larger bearish implications may be a dip below 1717, a support defined by the lows of Tuesday and Thursday. Something like that may open the path towards Monday’s low at 1704, the break of which may extend the decline towards 1692, near the low of June 9th.
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