Potential Correction in XAU/USD After Recent Bull Run
The price of XAU/USD has experienced a significant upward rally from $2,605 on October 10, 2024, to $2,741 as of October 21, 2024. This impressive bull run has been largely driven by market euphoria surrounding expectations of interest rate cuts. Investors have flocked to safe-haven assets like gold in anticipation of a looser monetary policy, boosting its appeal and driving prices higher.
However, despite the ongoing bullish sentiment, there are signs that a potential correction may be on the horizon. When analyzing the recent movement using the Fibonacci retracement tool, the golden ratio (61.8%) suggests a key level of potential support around $2,695. This level could act as a corrective target for profit-taking or a temporary pullback before the next leg higher. A retreat to $2,695 would align with the natural ebb and flow of price action after an extended bullish phase, providing an opportunity for the market to consolidate gains before resuming its upward trend.
In the 15-minute chart, XAU/USD is currently forming a bearish rising wedge pattern, a technical signal often associated with potential downward movement. This formation indicates that the recent bullish momentum may be losing steam, suggesting a reversal could be imminent. The narrowing price range within the wedge hints at weakening buying pressure, setting the stage for a possible breakdown.
Given the recent extended rally, traders may begin to take profits in the near term, especially as the upward momentum in XAU/USD shows signs of exhaustion. This could lead to increased selling pressure, amplifying the likelihood of a short-term correction.
If the price breaks below the lower boundary of the wedge, it would confirm the bearish signal, increasing the chances of a move towards key support levels, such as the previously mentioned $2,695 level. Traders looking to capitalize on this setup should closely monitor the price action for a clear breakdown, as it could offer strategic entry points for short positions or profit-taking opportunities for long traders.
Traders and investors should keep a close eye on this level, as a confirmed correction could present buying opportunities for those seeking to enter the market at a lower price. Conversely, if the price holds above key support levels, the bull run could continue, especially if macroeconomic factors such as additional rate cuts or geopolitical tensions further fuel gold's allure.
In conclusion, while the recent rally has been impressive, prudence suggests being prepared for a potential correction, especially with $2,695 emerging as a key technical level to watch.
However, despite the ongoing bullish sentiment, there are signs that a potential correction may be on the horizon. When analyzing the recent movement using the Fibonacci retracement tool, the golden ratio (61.8%) suggests a key level of potential support around $2,695. This level could act as a corrective target for profit-taking or a temporary pullback before the next leg higher. A retreat to $2,695 would align with the natural ebb and flow of price action after an extended bullish phase, providing an opportunity for the market to consolidate gains before resuming its upward trend.
In the 15-minute chart, XAU/USD is currently forming a bearish rising wedge pattern, a technical signal often associated with potential downward movement. This formation indicates that the recent bullish momentum may be losing steam, suggesting a reversal could be imminent. The narrowing price range within the wedge hints at weakening buying pressure, setting the stage for a possible breakdown.
Given the recent extended rally, traders may begin to take profits in the near term, especially as the upward momentum in XAU/USD shows signs of exhaustion. This could lead to increased selling pressure, amplifying the likelihood of a short-term correction.
If the price breaks below the lower boundary of the wedge, it would confirm the bearish signal, increasing the chances of a move towards key support levels, such as the previously mentioned $2,695 level. Traders looking to capitalize on this setup should closely monitor the price action for a clear breakdown, as it could offer strategic entry points for short positions or profit-taking opportunities for long traders.
Traders and investors should keep a close eye on this level, as a confirmed correction could present buying opportunities for those seeking to enter the market at a lower price. Conversely, if the price holds above key support levels, the bull run could continue, especially if macroeconomic factors such as additional rate cuts or geopolitical tensions further fuel gold's allure.
In conclusion, while the recent rally has been impressive, prudence suggests being prepared for a potential correction, especially with $2,695 emerging as a key technical level to watch.
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