- Gold bounces off the ascending channel’s lower boundary support as a bullish impulse emerges.
- The MACD reinforces XAU/USD’s uptrend on the daily chart.
- The bearish leg may continue toward $1,650 if the channel’s middle boundary support fails to hold.
Gold has continued to drop from January highs around $1,950 amid a stronger US dollar. The precious metal has sustained price action in a descending parallel channel, as observed on the daily chart. This shows that sellers have been relatively aggressive.
The channel’s lower boundary played a key role in stopping the losses from reaching $1,650 earlier this week. A rebound from this support allowed bulls to reclaim the ground at $1,700 and closed the trading at $1,723.
If support at the channel’s middle boundary holds, XAU/USD will shift the focus upward toward the crucial resistance at $1,800. Moreover, trading above the channel may trigger massive buy orders as the risk appetite increases.
XAU/USD 4-hour chart
The imminent uptrend has been reinforced by the Moving Average Convergence Divergence (MACD). This indicator tracks the momentum of the asset and measures its momentum. Traders can also use the MACD as a strategy to sell the top and by the bottom.
Note that as the MACD line (blue) crosses above the signal line, it is advisable to buy or increase your position. Moreover, the indicator is deep under the mean line, which means rising into the positive region would be a bullish signal.
It is worth mentioning that the uptrend will fail to materialize if gold fails to hold at the channel’s middle boundary. Declines toward $1,650 will come into the picture, extending the bearish impulse in the coming week.
Credit: FX Street