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Is gold (XAU/USD) just in a minor pullback or will it continue to fall?

Welcome to TA of the Day (TAOTD)!

Here’s the 1-hour chart:

Gold chart | 2024-07-10

XAU/USD 1-Hour Chart by TradingView

Using strictly technical analysis covered in our forex course, let’s analyze gold.

Technical Analysis of XAU/USD (Gold) Hourly Chart

Exponential Moving Averages (EMAs):

  • 200 EMA: Positioned around 2356.13. The price is currently above this level, indicating a long-term bullish trend. The slope of the 200 EMA is upward, providing further evidence of the bullish trend.
  • 50 EMA: Positioned around 2369.55. The price is also above this level, reinforcing the bullish sentiment. The slope of the 50 EMA is upward, indicating aa clear uptrend.
  • 10 EMA: Positioned around 2373.14. The price is slightly below this level, indicating a potential short-term pullback. The slope of the 10 EMA is slightly downward, suggesting short-term consolidation or a minor pullback.

If you’re new to EMAs, read our School of Pipsology lessons on exponential moving averages.

MACD:

  • MACD Line and Signal Line: The MACD line (blue) is below the signal line (orange), which is typically a bearish signal.
  • Histogram: The histogram is showing negative values but is decreasing, indicating that the short-term bearish momentum may be weakening. That said, consolidation or even a reversal is still possible if the histogram remains red.

If you’re new to MACD, read our School of Pipsology lessons on the MACD indicator.

Key Observations

Price Action:

  • Recent Trend: The price has been in an uptrend, making higher highs and higher lows,.
  • Pullback: Recently, the price has shown signs of a pullback from the highs near 2384, currently trading around 2370.85.
  • Support: The price found support near the 50 EMA (2369.55) during previous pullbacks, suggesting this level is critical for the short-term trend.
  • Resistance: The recent high near 2384 seems to be resistance.
  • Consolidation: There appears to be a consolidation phase as the price fluctuates between the 10 EMA and the 50 EMA.

Support and Resistance Levels:

  • Support: Immediate support at the 50 EMA (2369.55) and stronger support at the 200 EMA (2356.13).
  • Resistance: Around the recent high near 2384. A breakout above this level could indicate a continuation of the uptrend.

Potential Trade Scenarios

The following trade scenarios are provided solely for educational purposes. Since they don’t include full risk management practices, they are not intended to serve as actual trade recommendations, but merely food for thought to help you generate your own trade idea.

Long Bias:

  • Consideration Point: Consider entering a long position if the price finds support near the 50 EMA (2369.55) or the 200 EMA (2356.13) and shows signs of a bounce or bullish candlestick pattern.
  • Invalidation Point: Consider a stop-loss below the 200 EMA around 2356.13 to manage risk.
  • Potential Target: Look for a move towards the recent high at 2384 and potentially higher if the uptrend continues.

Short Bias:

  • Consideration Point: Consider entering a short position if the price retests but fails to break above the 10 EMA (2373.14) and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the MACD line crossing below the signal line.
  • Invalidation Point: Consider a stop-loss above the recent high at 2384 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
  • Potential Target: Initial target could be the 50 EMA (2369.55) or the 200 EMA (2356.13). If bearish momentum continues, look for further downside towards 2340 or lower.

TAOTD Summary

  • Trend: The trend has been bullish, but the current pullback and negative MACD histogram suggest a potential for consolidation or reversal.
  • Key Levels: Support at 2369.55 and 2356.13, resistance at 2384.
  • Momentum: MACD line being below signal line and a red histogram suggests caution.
  • EMA Slope Analysis: Upward slopes on the 200 and 50 EMAs indicate sustained bullish momentum, while the slightly downward slope on the 10 EMA suggests a short-term pullback.