Is gold on the verge of a breakout? On the 4-hour chart, I’ve noticed a new triangle consolidation pattern. Right now, the price is probing the support level.
In the chart, you’ll notice that gold prices have been setting higher lows while facing resistance around the $2,700 range. This forms an ascending triangle that’s been established since mid-November. Recently, with the improvement in risk appetite over the last week, the price dipped back to its triangular support, though the support seems to be holding firmly for now.
Yet, the technicals tell another story: the 100 SMA is currently residing below the 200 SMA, hinting that the easier path might lead downward. So, will we see a downward break from here?
Keep in mind, it’s the fundamentals that typically move the needle on price direction and volatility in the market. If you haven’t reviewed the fundamentals of gold and the U.S. dollar recently, it’s worth checking out the economic calendar and staying updated on the daily news!
Interestingly, the moving averages have started to converge, suggesting a potential bullish crossover could be around the corner. Should this crossover materialize, it might encourage gold enthusiasts to propel XAU/USD to the top of the triangle, possibly nearing R1 at $2,707.45 or even beyond.
A strong and sustained upward momentum could even challenge its all-time highs, flirting with the $2,790 level. A break higher might spark a rally matching the height of the triangle formation.
Conversely, if the bears persist and manage a breakout below the current levels, brace for a selloff that echoes the triangle’s size. Look for potential support initially around S1 at $2,608.73 and then S2 at $2,568.73.
Always keep your radar tuned for significant market catalysts that could swing overall market sentiment and ensure you adhere to prudent position sizing with every trade.
