Gold prices took a huge hit this Thursday as risk sentiment returns to the market following comments by US President Trump on getting closer to a US-China trade deal. The President had tweeted that a big deal was coming, which immediately triggered a selloff in the XAUUSD pair.
In addition, the Wall Street Journal has reported that the US offered massive cuts in tariffs as part of steps taken to ensure that a Phase 1 deal goes through. According to sources who spoke to the WSJ on the issue, a 50% reduction in tariffs on $360 billion worth of Chinese imports was offered by the US.
The news added to the already positive mood in the market, with risk-on sentiment fully at work on risky and safe-haven assets. Gold is now trading at 1466.50 (as at the time of writing), after hitting intraday highs of 1486.74.
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Technical Outlook for XAUUSD
Gold prices have been trading within a channel for some days now. Yesterday’s price action took XAUUSD above the horizontal resistance of 1475.53 and pushed towards the upper trend line (i.e. the return line) of the ascending channel, where it has found resistance. Today’s news has provided a good reason for prices to retreat towards the channel’s trendline.
Price is expected to find support at the 1460-1462 price range, which is where the channel’s trendline is expected to make contact with these price levels. However, if risky sentiment continues to pervade the market, a break of the channel to the downside cannot be ruled out. If this happens, then the immediate downside target would be the 1448.23 price level (November 11 low as well as previous highs of July 17 and August 2). Further downside targets are found at 1430.39, where a cluster of highs can be found from July 23 -30.
A return to the upside from the channel’s trendline has to break the return line to target the immediate upside target at 1494.18 (previous high of October 8 and November 6). Above this level, 1518.51 could be the next target for those bullish on XAUUSD.
As has been the case for most of 2019, the US-China trade headlines will dominate price action heading into the new year.
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