- Summary:
- Gold price selloff slows as XAUUSD nears potential support at 1448 and RSI indicator enters oversold region. Weekly close crucial for further action.
Gold price continues to trade lower on the day, but the selloff that was witnessed on the yellow metal seems to be slowing as gold price nears a potential support at 1450. At present levels, gold is sliding towards the yearly lows that were hit on Monday.
However, the charts show gold also failing to push above the long-term dynamic resistance formed by the 200-period simple moving average, which sets up a form of consolidation by the asset.
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Technical Outlook for XAUUSD
The initial selloff on gold was initiated by the classical divergence setup which shows higher highs on the price charts on 24 February and 9 March 2020, and by the failure swing at the overbought area in the RSI indicator window at the same time. This selloff has taken gold below the 1500 level for the first time in 2020.
Gold price on the XAUUSD is expected to test the immediate support seen at recent swing lows at 1448. This level marks the price at which the lows of 12/26 November 2019 and 16 March 2020 can be found. This price level will therefore determine if gold price is able to bounce back up, or if prices will keep tanking following a breakdown of that price level.
The RSI is now on the fringes of entering the oversold level, which may be the reason why sellers are exercising caution and not driving prices further south.
Attention will be on the 1448 price support. A break below this support requires confirmation by a 3% penetration close below this price level on the weekly chart. If this confirmation sails through, gold price may resume its downward trajectory, targeting July 2019 highs at 1430,39 in the first instance, with the July 2019 lows at 1410.84 also in the picture.
On the flip side, the 1475.53 price level is expected to constitute itself as the immediate resistance, with 1494 – 1500 serving as a psychological resistance. The presence of the 200SMA nearby may reinforce this resistance.
The sentiment for gold remains bearish and any recovery may be interpreted by market participants as an opportunity for cheaper re-entries to the downside.