Gold slumped below 1190 yesterday, to a new week low. The yellow metal remains under pressure as it approaches the base of a 5-week price pattern. Will XAUUSD break below the 1180 support?
Gold dropped significantly yesterday from the base of the 5-weeks corrective pattern to 1182, losing about 1.8% in the process. The lack of progress in the US-China trade talks, the budget deficit face-off between Italy and the EU and the ongoing BREXIT talks have been the major risk concerns this month. Yen strengthened yesterday amid risk aversion and after the Chinese Central Bank rate cut, but not Gold. Gold dropped instead to break the negative correlation with USDJPY. XAUUSD price is currently around 1185. Will price break below 1180 support to continue downside?
GOLD Technical Overview and Important Price Levels
In the last update, when Gold was around 1193, we expected price to stay above 1190 for a bullish effort. A break below 1190 was also expected to lead to more decline. The chart below was used.
The drop from 1208 looks corrective. The rally from 1180 to 1208 might have completed an impulse wave. The bullish scenario is still holding despite the 100 Pips drop. A break out of the 1208-1193 channel upside would confirm the bullish scenario. A break above 1208 could be followed by a fast break out of the bigger wave (w)-(x)-(y) channel and see price off to 1230 or above. If the current 1208-1193 dip turns out impulsive, a break below 1180 would confirm further decline to 1160.
Price broke below 1190 to invalidate the bullish scenario. It now seems Gold would dig further especially if 1180 is taken out. The chart below shows the new update.
The fall is emerging into an impulse wave. From 1208, a bearish impulse wave could continue to 1175 or 1165 before the next bullish correction or continuation. The next support is at 1180-1182. A break below 1180-1182 could see price at 1175 and 1165-1160. 1192-1193 is nearest resistance zone. A break above 1192-1193 could see price heading back to 1208 and an outright bullish breakout.
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