XAUUSD market technical outlook

22 Jan, 2021 09:04

Daily chart:

Growth of gold rate was paused at the resistance level 1874.96 that is driving today to the forming of downward pullback. Earlier broken resistance zone 1850.27-1856.07 is being tested at this moment being one of the classic options of strong zones breaks work off. Therefore there is a high probability that growth will extend in direction 1900.00 and 1906.50 (black arrow).

If the price settles below 1850.27-1.856.07, we’ll get premises for tangible correction in direction 1810.17-1818.32 (red scenario).

Local structure has initial important signs of downward reversal: the high wasn’t renewed and afterwards the local low was broken. At time of writing a pin-like bar was formed from the support zone 1857.02-1858.12 suggesting bulls intention to retain uptrend. However this bar has bearish close, therefore scenario of further growth is a key option. Drop of the quotes might resume either after direct break of the support zone 1857.02-1858.12 (scenario 1 on the chart) or after a certain pullback of the price to the upside (scenario 2). 

Conclusions:

Main scenario: Drop of the quotes to 1832.50.

Alternative scenario: Pullback to 1870.00-1871.00 followed by a downward reversal and decline in direction 1850.00 with aim at 1832.50.

Trading recommendations:

Shorts to 1850.00 and 1832.50.