10 weeks at this resistance, time for XAUUSD to find support
XAUUSD failed to achieve new high since 10 weeks. Bears turn to discover where support is, how high gold bulls are willing to catch any price correction.
Reminder: XAUUSD year -year still in down trend mode
I am a gold bull. I believe there is no reason gold should be undervalued when interest rates are becoming zero/negative. It is also obvious that long gold is one of best performing trades year-to-date. This performance means many short-term indicators are very bullish and can be read as up trending. For trading purposes however, we have to put on different hats to understand why price moves in zigzag.
Fact is, XAUUSD remains in a year – year down trend that started in 2013. It has not overcome 2015 high and therefore a sequence of lower-highs, lower-lows is still in place. Trend followers looking at this time frame naturally has reason to believe that XAUUSD is still bearish, that January – present rally is nothing more than a retracement. This was what I wrote in March:
Reasons gold price has not reversed, resistance overhead
However it is probably too early for gold bulls to celebrate. 3 months of rally simply does not reverse the year to year down trend that started in 2013 (which terminated the previous yr – yr up trend that topped in 2011). Based on this time frame, gold down trend (no reversal) is a fact. In addition, one can also draw an equidistant channel which also shows a down trend that is intact.
— Soh tiong hum (@Sohtionghum) March 10, 2016
Bulls had their turn but could not break, bears next
Even though I am bullish, I say now is the bear’s turn to take a swipe at XAUUSD.
Fact is there is a head and shoulders bearish reversal pattern on weekly chart printed right at the top of that big equidistant channel. Counting from the left ‘shoulder’, we can see XAUUSD resisted since 10 weeks. That’s 10 weeks for bulls to bring gold price higher but they failed at that long term channel, just under 2015 high. This action fails to change the year to year setup in place since 2013.
Price will move the path of least resistance. Since gold price cannot break 10-week zone which is now firmly resistance, it is bears’ turn to takeover, to push price down just to find out how ‘high’ support is.