Last week, I wrote about gold’s reversal potential.
If you saw Tuesday’s XAUUSD video, you’re well aware of why I thought the metal might reverse from the 1530/40 resistance area.
I also discussed gold in Saturday’s Forex Forecast video.
In fact, if you watched until the end of that video, you saw why last week’s reversal at 1536 was reasonably predictable.
But the more important topic of discussion was the potential head and shoulders pattern.
A daily close below the neckline at 1485/90 area was needed to confirm the bearish reversal pattern we’ve been discussing for several weeks.
That materialized on Monday.
Notice how XAUUSD closed Monday at 1472.
Keep in mind that I use New York close charts so that each 24-hour session opens and closes at 5 pm EST.
These charts are essential for trading price action from the daily time frame.
That means any retest of 1485/90 as new resistance is likely to attract sellers.
Now, that does not mean XAUUSD can’t move higher.
There are no guarantees in this business, and false breaks can and do happen.
However, as long as 1485/90 is intact as new resistance on a daily closing basis, I favor a move lower from gold.
As I mentioned last Tuesday and again on Saturday, the next key support level comes in at 1450.
It’s the mid-July swing high and also the 38.2% Fibonacci retracement of the year-to-date range.
A close below 1450 would open the door to 1410.
That’s the measured objective of this head and shoulders pattern and is also the 50% retracement of the same year-to-date range.
Alternatively, a daily close above 1490 would negate the short idea.
It would also re-expose last week’s high at 1536.
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