XAU/USD Weekly Forecast: Key Market Reversal Zones
Updated
1. Wyckoff Phases and Key Levels:
Phase A (PSY & ST): Preliminary Supply (PSY) marks the area where early sellers start pushing prices down. The Selling Test (ST) occurs as buyers and sellers test the supply. These phases lay the groundwork for a potential accumulation or distribution phase.
Phase B (B, AR, Creek, LPS, UT):
In Phase B, B and Automatic Rally (AR) represent the initial support and resistance levels. This is followed by a "Creek" or resistance line where price often consolidates below.
LPS (Last Point of Supply) and UT (Upthrust) within this phase mark the highs where the price struggled to maintain upward momentum, indicating potential supply zones.
The SOS (Sign of Strength) signals the market's strength, potentially leading to Phase C if buyers continue.
Phase C (Shakeout): This phase includes a sharp Shakeout where weaker hands are pushed out. This liquidity grab sets up the final push upward.
Phase D and E: In Phase D, we observe a final markup with Higher Highs (HH) and Higher Lows (HL) leading into the top where sellers might step in strongly for a distribution phase. This phase concludes in Phase E if a downtrend is established.
2. Elliott Wave Structure:
The primary wave count shows completion of Wave 5 at the top. Based on Elliott Wave Theory, this could mark the end of the upward impulse cycle, suggesting the start of an ABC correction pattern.
Wave A: The initial corrective leg downward is expected, which aligns with potential selling pressure in Phase D.
Wave B: After Wave A, a minor retracement upward could occur as a corrective pullback before continuing the downward correction.
Wave C: The final leg of the correction, Wave C, may complete the structure, allowing buyers to re-evaluate for potential long opportunities.
3. Supply and Demand Zones (Smart Money Concepts - SMC):
Supply Zone: Located near the highs of the chart, marking resistance and a significant level where institutional sellers may re-enter.
Demand Zone: This area is closer to the lows around the PSY and ST. If price moves down, these levels will act as support where buying interest could return.
Break of Structure (BOS): Key BOS levels signal structural shifts where the market confirms a new trend direction. Watching for BOS on lower timeframes can indicate smaller trend reversals within the larger correction.
4. Key Levels and Trading Plan for Next Week:
W Close Level: This week’s close level will be important for planning trades. If the price remains below this level, we could favor short setups.
Invalidation Points:
High Invalidation (1W): Located at the top of the wave structure; breaking this would invalidate the bearish setup.
Low of the Range (PWL): If the price closes below this low, it would strengthen bearish sentiment.
Potential Trade Setups:
Sell Setup: If price re-tests the high zones but shows resistance or bearish confirmation, short positions can be initiated with stops above the invalidation level.
Buy Setup: If price retraces to demand zones and shows a reversal, there could be potential long setups. A buy setup would look for evidence of absorption of supply before re-entry.
5. Macro Events and Sentiment Analysis:
Next week, key economic events (such as Fed announcements or US economic data releases) may influence the USD, which in turn affects XAU/USD. Hawkish Fed sentiment could strengthen the USD, pressuring XAU/USD lower, while dovish sentiment could support a rally in gold.
Daily Monitoring: Track price action near the Creek and Supply Zone for early signs of buyer weakness or seller strength, especially leading into economic events.
Summary:
Bearish Bias: As long as the price remains below the high invalidation point, the outlook leans bearish, expecting a corrective structure.
Key Levels: Watch for reactions at high and low invalidation points as well as around BOS zones for early trade entry signals.
Events Impact: U.S. economic releases and Fed communications are expected to create volatility, particularly in line with price action around key resistance/support areas.
Phase A (PSY & ST): Preliminary Supply (PSY) marks the area where early sellers start pushing prices down. The Selling Test (ST) occurs as buyers and sellers test the supply. These phases lay the groundwork for a potential accumulation or distribution phase.
Phase B (B, AR, Creek, LPS, UT):
In Phase B, B and Automatic Rally (AR) represent the initial support and resistance levels. This is followed by a "Creek" or resistance line where price often consolidates below.
LPS (Last Point of Supply) and UT (Upthrust) within this phase mark the highs where the price struggled to maintain upward momentum, indicating potential supply zones.
The SOS (Sign of Strength) signals the market's strength, potentially leading to Phase C if buyers continue.
Phase C (Shakeout): This phase includes a sharp Shakeout where weaker hands are pushed out. This liquidity grab sets up the final push upward.
Phase D and E: In Phase D, we observe a final markup with Higher Highs (HH) and Higher Lows (HL) leading into the top where sellers might step in strongly for a distribution phase. This phase concludes in Phase E if a downtrend is established.
2. Elliott Wave Structure:
The primary wave count shows completion of Wave 5 at the top. Based on Elliott Wave Theory, this could mark the end of the upward impulse cycle, suggesting the start of an ABC correction pattern.
Wave A: The initial corrective leg downward is expected, which aligns with potential selling pressure in Phase D.
Wave B: After Wave A, a minor retracement upward could occur as a corrective pullback before continuing the downward correction.
Wave C: The final leg of the correction, Wave C, may complete the structure, allowing buyers to re-evaluate for potential long opportunities.
3. Supply and Demand Zones (Smart Money Concepts - SMC):
Supply Zone: Located near the highs of the chart, marking resistance and a significant level where institutional sellers may re-enter.
Demand Zone: This area is closer to the lows around the PSY and ST. If price moves down, these levels will act as support where buying interest could return.
Break of Structure (BOS): Key BOS levels signal structural shifts where the market confirms a new trend direction. Watching for BOS on lower timeframes can indicate smaller trend reversals within the larger correction.
4. Key Levels and Trading Plan for Next Week:
W Close Level: This week’s close level will be important for planning trades. If the price remains below this level, we could favor short setups.
Invalidation Points:
High Invalidation (1W): Located at the top of the wave structure; breaking this would invalidate the bearish setup.
Low of the Range (PWL): If the price closes below this low, it would strengthen bearish sentiment.
Potential Trade Setups:
Sell Setup: If price re-tests the high zones but shows resistance or bearish confirmation, short positions can be initiated with stops above the invalidation level.
Buy Setup: If price retraces to demand zones and shows a reversal, there could be potential long setups. A buy setup would look for evidence of absorption of supply before re-entry.
5. Macro Events and Sentiment Analysis:
Next week, key economic events (such as Fed announcements or US economic data releases) may influence the USD, which in turn affects XAU/USD. Hawkish Fed sentiment could strengthen the USD, pressuring XAU/USD lower, while dovish sentiment could support a rally in gold.
Daily Monitoring: Track price action near the Creek and Supply Zone for early signs of buyer weakness or seller strength, especially leading into economic events.
Summary:
Bearish Bias: As long as the price remains below the high invalidation point, the outlook leans bearish, expecting a corrective structure.
Key Levels: Watch for reactions at high and low invalidation points as well as around BOS zones for early trade entry signals.
Events Impact: U.S. economic releases and Fed communications are expected to create volatility, particularly in line with price action around key resistance/support areas.
Note
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