Gold Price – XAUUSD Form Inverse Head and Shoulders Hinting At A Potential Rally

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Written By: Angeline Feliciano

Jan 20, 2020, 05:07 GMT 05:07

Gold Prices

Summary:

Gold price has given up some of its gains from December. However, an inverse head and shoulders pattern on the 4-hour chart hints that it may soon rally.

Inverse Head and Shoulders Spotted on XAUUSD

After gold price skyrocketed in the last few trading days of 2019, XAUUSD has given up most of its gains. Drawing the Fibonacci retracement tool from the low of December 13, the precious metal looks to have pulled back to the 50% Fib level. A closer look also reveals that XAUUSD has recently made a higher low after making two consecutive lower lows. This chart pattern is referred to as an inverse head and shoulders pattern is widely seen as a bullish indicator.

Gold price is currently testing neckline resistance around $1,560.00. A strong bullish close above last week’s high at $,1561.00 could indicate that a bigger rally, towards the $1,600.00 handle, may soon happen.

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Potential Support at Rising Trend Line

If there are not enough buyers in XAUUSD today, however, we could see gold price trade lower. The 1-hour chart shows a confluence of support around $1,557.30. For one, this price coincides with the rising trend line from connecting the higher lows of January 13 and January 16. Secondly, it also aligns with the 100 SMA. Reversal candles around this price may indicate that gold price could soon begin its rally. On the other hand, a strong bearish close below the trend line would invalidate the inverse head and shoulders pattern and trend line support. XAUUSD may then fall to $1,536.75 where it bottomed on January 14.

Written By: Angeline Feliciano

Angeline Feliciano has been trading Forex for over ten years. She has invaluable experience working in FX education companies like BabyPips.com and Learn to Trade as a trader, currency analyst, trading coach, and presenter. Aside from these roles, she has also created intensive educational content on fundamental analysis which is heavily sought after by retail traders. She has taught hundreds of people how to trade the FX market in the Philippines and in Australia. When she is not trading, you can find her in the gym lifting weights.