- Gold meets a critical resistance area for a compelling case to the downside.
- A significant pullback could now be on the cards to correct recent rally.
The price of gold has shot higher and meets the bearish commitments at a critical juncture in the precious metal’s journey.
From a longer-term perspective, the bullish trend is well soiled, however, a significant pullback could now be on the cards to correct the highly overextended W-formation’s impulse.
The following is a top-down analysis which illustrates the compelling market structure and where the next trading opportunity could arise to the downside.
The price is meeting a strong level of resistance which prevented the mid-winter come back and the area would be expected to hold initial tests.
From a daily perspective, the W-formation is highly overextended and is due for a correction.
A correction would be expected to at least complete a 38.2% Fibonacci retracement, although the support structure is much lower down meeting a 61.8% Fibo level.
With the price still above the current support structure reinforced by the 10 moving average on the 4-hour chart, there is minimal risk to reward opportunities at this juncture.
However, a break of the support would be compelling for a downside move to correct the over extended W-formation’s impulse.
Credit: FX Street