Chapter 18 07/10 XAUUSD: Continue to Go Short at the Highs as the Rebound of Gold Price Was Weaker than Expecte
Abstract: Although the price of gold rose by more than US$20 last Friday, the gold market has not yet proved that its downward trend has come to an end, as rising interest rates continue to keep the asset under pressure.
Technical Analysis
The precious metal market continues to face challenges in the second half of the year. The price of gold only rose by 5.1% from January to June 2023. Compared with the indicators of the U.S. stock market, this growth is eclipsed. In the second half of the year, the price of gold is still in a downward trend.
One of the key factors affecting the gold and USD is the upward trend of interest rates, especially in the U.S. This trend has led to an increase in the yield of U.S. Treasury Securities and a stronger exchange rate of the USD. Historically, gold prices have been negatively correlated with these indicators.
Technical Analysis
In the 4H timeframe, the price of gold is once again under pressure of 89 and 100 SMA, indicating that the bearish trend has continued to develop well since May 22, 2023. This price behavior strengthens the intensity of the current trend and the continuous pressure of bears. The nearest support area is at the level of US$1,893, and breaking through this level will pave the way for falling to the range of US$1,860.
The downtrend is supported by the momentum indicator. This is because its signal line has moved out of the bar chart area and is signaling a continuation of the decline. It is worth noting that on June 30, 2023, when the price tested the level of US$1,935, a bullish divergence signal was formed on the MACD indicator, so the price reversed to the downside. Currently, the indicator's downward momentum remains favorable.
In the 1H timeframe, the price has broken through the boundary of the bullish rebound channel. At present, the price is lower than the 200-day SMA, indicating that the bearish pressure is increasing. However, there may still be a small bullish rebound, which may test the level of US$1,928 and then continue to fall.
Overall, gold prices are still trading in a range, and the downtrend is still intact as long as the upper edge of the range at US$1,940 has not been materially breached. It is recommended to go short at the highs.
Trading Recommendations
Trading direction: Short
Entry price: 1928
Target price: 1860
Stop loss: 1940
Deadline: 2023-07-24 23:55:00
Support: 1900, 1893, 1890
Resistance: 1915, 1921, 1929
