The London session saw a much weaker performance from XAUUSD today, as it plunged around 2% on the open to print a low of $1869 on the day. Perhaps as the US general election approaches, coupled with stimulus talk and ongoing COVID-19 concerns, we may be seeing the start of some volatile moves for the precious metal.
Today’s sharp decline on the hourly pushed Gold deep into oversold territory, as shown on the RSI indicator above. The price did somewhat recover heading into US trading hours but is still actively trying to discover traces of support.
Before this move, the chart above gave an important technical clue as to what may be in store for XAUUSD short-term. Notice how the price attempted to breach the currently weekly pivot level of $1910 multiple times before reacting with an abrupt change in direction. Generally speaking, price action will rarely challenge a critical level more than three times in quick succession before giving up and pursuing the path of least resistance.
While the short-term bearish sentiment lingers for XAUUSD, it seems less likely that we’ll see any significant bullish activity for the time being. Although considering it remains in oversold territory, we could see some consolidative patterns emerge and perhaps a retest of previous lows such as $1897 before a further decline. The nearest downside target following the low of $1870 looks to be in the area of $1848.
The reason I’m leaning towards longer-term bearishness too is because of what the daily Ichimoku chart is suggesting below. In mid-September, the price fell below the cloud and quite clearly has struggled to break back above. We’re also starting to see the cloud thicken in that $1910 region, increasing the potential for resistance and perhaps limiting bullish opportunities going forward.
Finally, I must stress that we are likely to see greater volatility levels in XAUUSD both before and after the US election. As some of these technical signals appear, a sensible approach to trading is required.
Note: Click on charts to enlarge.
By Adam Taylor CTEe
Sources: Go Markets, Meta Trader 5, TradingView, Bloomberg
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