XAU/USD Technical Analysis: 11th December 2018 – Risk Tolerance Dependent
Gold is the notorious safe haven asset, when you see uncertainty in the market, investors tend to flock to gold and the Japanese Yen. Given the recent turbulence with Brexit and the US and China trade war, it is no wonder we’re seeing XAU/USD show some strength over recent weeks.
The previous weekly candle is bullish and shows strength in this market. The assumption should be for continuation this week. Although the slow stochastic is approaching the overbought zone, until it gives a sell signal the bias should still be to the upside.
The daily chart has officially broken the 200 moving average with a strong bullish candle, this confirms the break. Whilst the market is above the 200 EMA, the expectations is for continuation. XAU/USD has also broken about the recent resistance level, 1,237.12, any retest and a daily close above the 200 EMA would show continued strength at these levels and offer great support.
Resistance Level: 1,295.79
Support Levels: 1,237.12 & 1,211.32
The trend is up, confirmed by the trend line (3 touches) and creation of higher highs and higher lows.
Whilst there are strong signals for continuation, there are signs to be cautious. The distance from the trend line shows fast momentum, however when trading, you want to be buying at the trend line and catching that momentum, therefore entering the market here is dangerous.
The moving averages are also not in the correct order for an uptrend, the 200 is the highest followed by the 8 and then the 50. This implies potential consolidation before a break higher.
Whilst there are signals of strength in XAU/USD, there are also signs of consolidation. Entering a trade here has higher risk but higher reward. The higher reward being that this market continues to the next resistance level with the momentum it is showing. A tight stop loss could be placed just below the 1,237.12 level with a target of 1,295.79, offering very good risk to reward ratio.
The more risk averse traders may be more inclined for more confirmation that this market is ready to break higher. A potential retracement could also offer a good buy zone, with the support level, 1,211.32, two moving averages and a trend line as an area to look to buy.
Disclaimer: This should not be used as investment advice and is only an opinion. Do your own research before looking to risk your own capital in the financial markets.