XAU/USD traded higher yesterday, and it’s been in a recovery mode since May 16th, when it hit support near the 1783 barrier, marked by the lows of November 3rd and December 15th. However, it is still trading below the prior upside support line drawn from the low of August 9th, and thus, based on technical analysis principles, we need to keep the door for another round of selling open.
The bears could take charge from near the crossroads of that line and the 1850 zone, marked by the inside swing low of May 3rd, and perhaps take the metal down for another test near 1783. Nonetheless, a break below that zone is the move that would make us more confident with regards to a bearish short-term outlook. This will confirm a forthcoming lower low and may initially target the low of December 15th, at 1754, the break of which could carry extensions towards the low of September 29th, at around 1722. If the bears are not willing to stop there, then we could see them diving all the way down to the low of August 9th, at 1685.
Shifting attention to our daily oscillators, we see that the RSI rebounded from near its 30 line, while the MACD, although below both its zero and trigger lines, shows signs of bottoming as well. Both indicators detect slowing downside speed and suggest that some further recovery may be looming before the next leg south.
On the upside, we would like to see a strong break back above the 1915 zone, before we start examining the bullish case again. The yellow metal will be already well above the aforementioned upside line and thus, the bulls may get encouraged to jump to the 1965 territory, marked by the high of March 24th. If they don’t stop there, we could see them testing the round number of 2000, near the high of April 18th, where another break could carry extensions towards the record high of 2075, marked by the high of August 6th, 2020, and slightly above the peak of March 8th.
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