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The Fibonacci retracements, the Friday’s breakout, and the channels. What do they say?

In today’s gold price forecast, I decided to share my insights from the last published Quick Gold Alert with you. Have a nice read!

Technical Picture of Gold

(Click on image to enlarge)

Let’s start today’s Quick Gold Alert by quoting Monday’s edition:

(…) Will we see further improvement?

(…) the price remains in two rising trend channels, which in combination with the lack of the sell signals increases the probability of an attack on the upper border of the green rising trend channel (currently at around $2,489.43).

However, if this resistance is broken, we could see an upswing even to the next resistance zone (…) created by the upper border of the black rising trend channel (marked with dashed lines) and the 78.6% Fibonacci retracement in the coming day(s).

Looking at the 4-hour chart, we see that the situation developed in tune with the above bullish scenario, and gold futures not only reached the mentioned targets but also finished Monday’s session above them.

Thanks to this price action, the buyers managed to close the day above the barrier of $2,500 at the highest level in history (at $2,504), which was a bullish development that translated into a higher Tuesday open.

In this way, the bulls gained one more ally – the green gap ($2,504-$2,512.60), which despite yesterday’s test (seen more clearly on the daily chart) withstood the selling pressure and remained open, serving as the nearest support.

Earlier today, the bears tested it once again (hitting an intraday low of $2,495), but their opponents quickly repelled the attack, returning above the lower line of the gap. This positive development triggered further improvement and resulted in a climb above the upper border of the gap in the following hours.

How did this price action affect the 4-hour chart?

Looking at the second chart, we see that thanks to today’s downswing, gold futures slipped to the previously broken 78.6% Fibonacci retracement, the lower border of the black rising channel and the upper border of the green rising trend channel, which all together serve as the nearest support.

When we take a closer look at it, we can see that in this area there is also a lower border of the pink consolidation, which reinforces the mentioned support zone.

As you see all these supports withstood the bears’ pressure and lured the bulls to the trading floor, which translated into a rebound.

Thanks to this upswing, gold futures invalidated not only the earlier small breakdown under the lower border of the green gap (seen more clearly from the daily perspective) and the barrier of $2,500 but also the drop below the above-mentioned support zone.

This bullish development triggered an increase to the upper border of the pink consolidation, which suggests that we could see an attack not only on Tuesday’s peak but also the Aug.2 high of $2,522.30 in the coming day(s) – especially when we consider the fact that buy signals generated by the daily indicators remain in the cards, supporting the buyers.

What could be the pro-bullish scenario?

(…) if we consider today’s rebound from the upper border of the green rising channel as a verification of the earlier breakout, we could see an increase even to $2,542.80, where the size of the upward move would correspond to the height of the green channel.

And speaking about the channel… when we take a look at the daily chart, we can see that before the bulls can reach such high levels, they will have to face one more resistance - the upper border of the short-term orange channel, which is currently at around $2,536.21.

Summing up, gold futures re-tested the strength of the previously broken barrier of $2,500 and the lower border of the green gap (formed yesterday), declining at the same time to the first important support zone seen from the 4-hour chart point of view. All the mentioned supports withstood the selling pressure, triggering a rebound, which, in my opinion, could translate into an attack on the early Aug. peak (or even a realization of the pro-bullish scenario) in the coming day(s) (…). Stay tuned.

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