- Gold is likely to open next with gains targeting 1,940 if the 50 SMA resistance is broken.
- An ascending parallel channel and the 100 SMA work hand in hand, providing short term support.
Gold closed the week’s trading at 1,900 after a minor correction from the weekly high at 1,914. The precious metal has gradually sustained a bullish price action within an ascending parallel channel. In September, support was embraced roughly at 1,860. On the other hand, the channel’s resistance limits upward movements.
A monthly high traded slightly above 1,930, marking gold’s most significant resistance zone. The 4-hour chart displays a bullish outlook for XAU/USD. For instance, the 100 Simple Moving Average provides immediate support in conjunction with the ascending channel’s lower trendline.
XAU/USD 4-hour chart
Simultaneously, the Relative Strength Index (RSI) emphasizes the bullish scenario as it reaches out towards the midline. The action above the average would most likely encourage more buy orders, creating more volume supporting the bullish outlook.
On the upside, if the 50 SMA resistance is overcome, gold is expected to launch the recovery to 1,940. Traders must be aware that some buying pressure would be absorbed at 1,920 and the monthly high. Trading above the channel resistance might result in the ultimate liftoff to 2,000.
It is worth mentioning that gold’s bullish outlook may be invalidated if the 100 SMA and the channel’s support are shattered. In this case, support at 1,880 will come in handy. However, extended losses will seek refuge at 1,860 (September’s support).
Credit: FX Street