XAU/USD traded lower on Friday, after hitting resistance at 1740 on Thursday. Today’s slide has taken the price below Wednesday’s low of 1708, and bearing in mind that, overall, the precious metal is trading below the downside resistance line drawn from the peak of Jan. 6, we would expect the fall to continue.
In our view, the move below 1708 may have opened the way towards Monday’s low of 1677, the break of which would confirm a forthcoming lower low and may allow the bears to challenge the 1659 hurdle, defined as a support by the low of Apr. 21. If that barrier is not able to stop the slide either, then we may experience extensions towards the low of Apr. 8, at around 1640.
Shifting attention to our short-term oscillators, we see that the RSI fell back below 50 and continues to point down, while the MACD, although fractionally positive, lies below its trigger line. It could turn negative soon. Both indicators suggest that gold may start picking up downside speed soon, which supports the idea for further declines in the short run.
Alternatively, in order to abandon the bearish case and start examining a bullish reversal, we would like to see a clear break above 1760. The price would already be above the aforementioned downside line and may initially climb towards the 1783 zone, marked as a resistance by the inside swing low of Feb. 24. A break above 1783 may extend the recovery towards the peak of that day, at 1813.