This week, the price of the pair XAU/USD increased significantly, reaching three-month highs at the level of 1227.09. Demand for gold was caused by poor American macro-economic statistics , in particular by the negative retail sales data for April. At the moment, the price is undergoing correction trying to reach the level of 1213.15 (Fibonacci 23.6%). Breakdown of this level will enable further decline to 1207.70 (middle line of Bollinger bands) and 1205.70 (Fibonacci retracement of 38.2%).
Technical indicators also show continuation of the downward correction. MACD histogram is in the positive zone and can cross the signal line from top to bottom in the near future, giving a buy signal. Stochastic lines are directed downwards.
On the daily chart the price has broken down the upper line of Bollinger bands, indicating a chance of the correction to the levels of 1213.15 and 1207.70 (Fibonacci 38.2%). Note, that correction Fibonacci levels 38.2% almost coincides on the charts of the both timeframes, which intensify support at the levels of 1205.70-1207.70. Strong resistance level is also 1224.80, which coincides with Fibonacci retracement on the charts H4 и D1 (0.0% and 50.0% respectively).
In general, technical indicators demonstrate that uptrend will continue. Downward correction is also possible, which will be caused by breakdown of the upper line of Bollinger bands indicator is balanced by the divergence of the bands, which confirms uptrend. MACD histogram is in the positive zone; its volumes are increasing. Stochastic lines are directed upwards.
Support and resistance
Support levels: 1213.15, 1207.70, 1205.70, 1202.16 and 1195.70.
Resistance levels: 1224.80, 1230.85, 1238.50 and 1243.50.
Based on the technical analysis it is expected that in the near future downward correction will continue, while uptrend will maintain. Short-term short positions can be opened at the current price with the target of 1207.70-1205.70. At the same level pending buy orders can be placed. The target of such orders is the level of 1224.80.