On April 16, we wrote why the $2,380 zone is an important resistance area.
The XAU/USD chart shows that:
1) After fading fluctuations (they formed a narrowing consolidation triangle – shown in green), the price of gold dropped sharply (shown by a black arrow) on April 22-23.
2) Then, the price found support in the form of the lower border of the ascending channel (shown in blue), which has been in effect since the beginning of March. This led to the formation of another consolidation pattern between the blue lines.
3) An upward breakdown of the red lines on May 9 could be interpreted as an attempt by the bulls to resume the upward trend within the blue channel, but we could expect that the green triangle with its axis around 2380 would provide resistance.
However, it is important to pay attention to the nature of buyers’ behaviour when the price approaches an important resistance – the XAU/USD chart shows that the bulls’ persistence has quickly depleted. From the point of view of technical analysis of the gold price, a bearish engulfing has formed on the chart (shown by a blue arrow) in the area of 2380. In other words, the price of gold tested the resistance level, revealing the activity of bears defending their territory.
From the point of view of fundamental analysis, market participants can position themselves ahead of the key news for the beginning of the week: the CPI index will be published on Wednesday at 15:30 GMT+3.
But if economic or geopolitical news does not change the balance, in which, as we observe, the initiative is on the side of the bears, then this may create a threat of a breakdown of the blue channel’s lower border.
