Could the retracement end today?
Today’s low could certainly mark the end of gold’s bearish retracement after last week’s record high at 2,790. First, gold should regain the 20-day line and then this week’s high of 2,643. Until then, the potential for additional tests of support and a possible decline may still occur. October’s monthly low is at 2,602, which is also the bottom of the recent bull flag pattern.
Bearish reversal, top of the channel
One reason for a possible lower support test is the rising trend channel in gold. Recently, resistance was seen at the top of the channel and a failed breakout. Therefore, a swing to the low end of the channel could occur. The lower trendline used only two points and has not been accessed since it was drawn after the August swing low. This seems to increase the potential for such a move, as the cycle typically sees a move to the other side of the channel once a reversal occurs from one side. Nevertheless, this only becomes likely if the 50-day line support is broken.
The 50-day MA has not tested well as support since it was recovered on July 3, aside from some quick tests shortly after the breakout. It should therefore have a good chance of maintaining support, in this case especially as the 78.6% retracement identifies a similar level as potentially significant.
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