XAU/USD outlook: Gold bears regained control and look for test of key supports

XAU/USD

Gold price continues to trend lower for the third consecutive day, deflated by stronger dollar and optimism on signs of progress in US-EU trade talks.

Bears regained control after a double upside rejection and false break above the bear-trendline connecting ($3500 record high and June 16 lower top at $3452) with formation of bearish engulfing pattern on daily chart, providing fresh bearish signal.

Strong acceleration pushed the metal’s price down by over 2.5% in past three days, to retrace over a half of recent $3246/$3438 upleg (Fibo 50% at $3342, reinforced by 20DMA) and approach key support at $3330 (daily Ichimoku cloud top) as rising daily cloud supported the action since mid-Jan and cloud top contained a number of attacks in past two months.

Penetration of daily cloud and violation nearby other pivotal support at $3320 (trendline support / Fibo 61.8%) would sideline larger bulls and risk further losses towards $3300/$3290 zone (psychological / Fibo 76.4%).

Weaker technical studies on daily chart (14-d momentum hits the centreline in attempts to break into negative territory / price fell below 10 and 20DMA’s) support the notion, with formation of weekly Gravestone Doji candle signaling that sellers currently dominate.

However, it will be important to watch reaction at daily cloud top, as cloud still marks very significant support that may limit dips one more time.

Res: 3350; 3365; 3374; 3393.
Sup: 3330; 3320; 3309; 3300.

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