Since tensions in the Middle East died down, it has been a relatively quiet week for gold. The recent slide on XAUUSD was brought about by optimism for the US-China Phase One Deal. But now that that’s over, risk appetite seems to be subdued. This has allowed gold prices to find support at their previous highs on the daily time frame. A closer look at the most recent candlesticks shows that a morning star candlestick pattern has materialized. When you attend our forex trading course, you will learn that this is often considered as bullish confirmation.
Inverse Head and Shoulders on the Hourly Chart of XAUUSD
The shorter time frame also seems to suggest an impending bullish run. XAUUSD initially formed lower lows but were succeeded by higher lows. This consequently formed what looks like an inverse head and shoulders chart pattern. Gold price seems to have already broken resistance at the neckline around $1,555.50. However, it may still pull back to around $1,552.00 and test support at the rising trend line (from connecting the lows of January 14 and January 15). If there are enough buyers to push XAUUSD past resistance at the 200 SMA at $1,558.00, the next resistance level will be at $1,563.00 where gold price peaked on January 10. A bullish close above that level could suggest that XAUUSD is on its way to its 6-year highs above $1,600.00.
On the other hand, a bearish close below trend line support would invalidate the inverse head and shoulders pattern. It may mean that gold price could drop to its January 14 low at $1,536.50. If support at that price does not hold, the next floor could be at $1,511.70 where XAUUSD made highs in October.