Goldโs Unsustainable Rally: A Strong Correction Ahead?
In my analysis yesterday, I explained that XAU/USD is significantly deviated from the mean, with its 20-period moving average nearly 1,500 pips below the current price. This level of divergence is unsustainable.
As always, trading against the trend is riskyโespecially when thereโs no clear guide, such as a resistance level, to structure the trade.
Although my sell trade from yesterday hit its stop loss this morning, my outlook remains the same: a strong correction is likely.
Looking at a smaller time frame, we can see that Gold has risen sharply since last week, gaining 1,000 pips. The 3,125โ3,130 zone is acting as a key short-term confluence support.
At the time of writing, the price is hovering just above this level with significant volatility. Typically, strong volatility signals potential reversals, and considering all factors, a downward move is highly probable.
In conclusion, I maintain my expectation of a strong downside reversal. A break below the confluence support would confirm this move, and I anticipate at least a 500+ pip drop in the coming days.
With that in mind, I will be looking to re-enter short.
Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analyses and educational articles.
