Spot gold (XAU/USD) is testing the upper limits of its recent downtrend!
Will the precious metal keep on losing pips against the U.S. dollar?
Or will we see a breakout this week?
If you’ve been watching spot gold lately, then you’ll know that XAU/USD has been making lower highs and lower lows since May when the pair found resistance at the $2,040 area.
XAU/USD’s downtrend has taken it has far as $1,900 but it looks like there were enough buyers at the area to encourage a first touch bounce.
Will XAU/USD retest its $1,900 lows?
The pair is currently knocking on the $1,930 levels, which is not too far from the top of a descending channel and 200 SMA on the 4-hour time frame. What’s more, XAU/USD’s current levels are also near the 50% Fibonacci retracement of June’s downswing!
A short trade at the $1,930 – $1,940 zone would yield a good risk ratio especially if XAU/USD makes new July lows below $1,900 without going past the 200 SMA.
The $1,900 previous low is a good initial target, but you can also aim for new monthly lows if there’s enough bearish momentum.
Feel like XAU/USD is bound for an upside breakout instead?
You can wait for a clear break above the channel or the 200 SMA before aiming for previous areas of interest like $1,970 or $2,000.