- Gold staged a modest recovery from the vicinity of the very important 200-day SMA.
- The near-term technical set-up still seems tilted firmly in favour of bearish traders.
- The attempted recovery could be seen as a selling opportunity and remain capped.
Gold found decent support just ahead of the very important 200-day SMA, near the $1800 mark and staged a modest bounce on Wednesday. The precious metal was last seen trading with modest gains near the $1810, up around 0.26% for the day.
A modest pullback in the US equity futures turned out to be a key factor that prompted some short-covering near a technically significant moving average. That said, the near-term bias remains tilted firmly in favour of bearish traders.
The XAU/USD on Tuesday broke through a horizontal support near the $1850-48 region. A subsequent fall below the 38.2% Fibonacci level of the $1451-$2075 positive move and descending channel support confirmed a fresh bearish breakdown.
Meanwhile, technical indicators on the daily chart maintained their bearish bias and are still far from being in the oversold territory. This further adds credence to the negative outlook and supports prospects for additional weakness.
However, it will be prudent to wait for some follow-through selling below the $1795 region (200-DMA) before positioning for any further depreciating move. The yellow metal might then accelerate the slide towards 50% Fibo. level, around the $1760 region.
On the flip side, the channel support breakpoint, around the $1820 area, now seems to act as immediate resistance. Any subsequent move up could be seen as a selling opportunity and remain capped near the $1835 area (38.2% Fibo.).
XAU/USD daily chart
Technial levels to watch