After gold price skyrocketed in the last few trading days of 2019, XAUUSD has given up most of its gains. Drawing the Fibonacci retracement tool from the low of December 13, the precious metal looks to have pulled back to the 50% Fib level. A closer look also reveals that XAUUSD has recently made a higher low after making two consecutive lower lows. This chart pattern is referred to as an inverse head and shoulders pattern is widely seen as a bullish indicator.
Gold price is currently testing neckline resistance around $1,560.00. A strong bullish close above last week’s high at $,1561.00 could indicate that a bigger rally, towards the $1,600.00 handle, may soon happen.
If there are not enough buyers in XAUUSD today, however, we could see gold price trade lower. The 1-hour chart shows a confluence of support around $1,557.30. For one, this price coincides with the rising trend line from connecting the higher lows of January 13 and January 16. Secondly, it also aligns with the 100 SMA. Reversal candles around this price may indicate that gold price could soon begin its rally. On the other hand, a strong bearish close below the trend line would invalidate the inverse head and shoulders pattern and trend line support. XAUUSD may then fall to $1,536.75 where it bottomed on January 14.