XAU / USD Technicals – Breakout Potential on 8 Hourly and Weekly Charts

8 Hourly Chart

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Gold price broke away from the downward trendline, going through resistance of 1,675 ceiling along the way. Overhead resistance can be seen just below 1,695 in the form of 38.2% Fib retracement from 5th Oct ’12 highs vs 4th Jan ’13 lows, which coincides with the previous swing high early this year and support for Dec ’12.

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From the Weekly Chart, 38.2% Fib Retracement using Weekly Chart (Sep ’11 High vs Dec ’11 Low) has been broken, with 61.8% Fib providing potential target reference for bulls which coincides with numerous swing highs in Nov ’11, Feb ’12 and Oct ’12.  However, calling this as a bullish breakout is too premature. Price appears to be heading lower from Oct ’12 highs, with current rally looking more like a retracement rather than a full-on reversal. Furthermore, we still have a major of the week left, with ample opportunities for price to fall down below the 31.8% Fib, resulting in a confirmation of downtrend rather, the total opposite of a bullish breakout.

Similarly, for the 8 hourly chart above, it will be prudent to observe price action along the 31.8% Fib (different price level from Weekly Fib) for bullish/bearish direction.

 

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