Bearish reversal alert: Gold’s head and shoulder pattern indicates a sharp decline ahead”
- XAU/USD trade for a potential $1,912.2 when looking at the head and shoulder pattern
- The trading signal provided should last 1 week with a potential upside of 3.3%
- No major high-impact news on the USD this week, so the price will likely remain calm
XAU/USD trading strategyCopy link to section
- Buy/sell asset: Sell XAU/USD
- Entry price: $1,978.2
- Stop loss: $1,993.5
- Leverage: 1x
- Take profit 1: $1,960.0
- Take profit 2: $1,937.0
- Take profit 3: $1912.2
- Timeframe: 1 week
- Maximum profit: 3.32%
- Maximum loss: 0.77%
XAU/USD chart and technical analysisCopy link to section
The price of Gold has been in a steep bullish trend since last month and gained almost 11% since then. However, the appearance of the bearish head and shoulder pattern indicates a sharp decline ahead.
The head and shoulder pattern is a bearish reversal pattern that appears when bears dominate the market and a bearish trend is followed afterwards.
I am expecting the price will retest the neckline around the $1,978.25 resistance level before dropping to the $1,912.2 support level and beyond.
Gold fundamental analysisCopy link to section
Fundamentally, the gold rally was mainly influenced by the Middles-East crisis. As the intensity of the crisis declines the price of gold will also possibly drop.
Moreover, the dollar index was making a correction and was dropping which also helped the gold rally. Now that the Middle East crisis is less relevant and the US dollar seems gaining strength a short trend on gold will likely follow.
Looking to invest?
Invest and trade CFD stocks, ETFs, digital assets & commodities in minutes with our highest-rated broker.
Gold to US dollar trade idea takeawaysCopy link to section
- The appearance of the head and shoulder pattern on gold indicates a potential bearish trend ahead.
- The price will possibly drop to the $1,912.2 support level in the coming days.
- Multiple take-profit levels have been added to secure profit along the way.
- The risk-to-reward ratio on this trade is 1:4.2.
- The entry and stoploss prices have been placed at secure levels with the least probability of getting hit.
- Good luck!