XAU/USD traded lower yesterday, after it hit resistance at 1815, and continued to trade lower today, heading towards the key support zone of 1790. In the short run, the precious metal appears to be trading within a sideways range between that barrier and the 1832 resistance since July 6. However, in the bigger picture, we see that it remains below the downside resistance line drawn from the high of June 1. With that in mind, we would consider the outlook as cautiously negative.
The move that would make us more confident on the downside is a dip below the key support area of 1790. This will confirm a forthcoming lower low on the 4-hour chart and could pave the way towards the low of July 1, at around 1768. If that barrier fails to stop the slide, then its break may lead the metal towards the low of June 29, at 1750.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, slightly above 30 and points down. It could fall below 30 soon. The MACD runs below both its zero and trigger lines, pointing down as well. Both indicators detect strong downside speed and support the notion that there may be more declines in store.
Now, in order to start examining the bullish case, we would like to see a break above the upper end of the aforementioned range, at around 1832. This could also signal the break above the downside resistance line drawn from the high of June 1, and may encourage advances towards the 1852 area. If the bulls are strong enough to overcome that hurdle as well, then we could see extensions towards eh 1870 territory, defined as a resistance by the high of June 14, and the inside swing low of June 10.