Gold Bearish Extension Key Levels to Watch in the Week ahead
Technical Breakdown of the Analysis
Wyckoff Phases & Distribution
Phase B of the Wyckoff Method: This is a critical phase where the price makes a Secondary Test (ST), followed by an Upthrust (UT), indicating buyer exhaustion and distribution by smart money.
Upthrust After Distribution (UTAD): The price has potentially completed a UTAD, signaling the completion of the distribution phase and that a markdown phase is imminent.
Sign of Weakness (SOW) in Phase B: The SOW suggests that sellers have gained control of the market, leading to lower highs and breaking the demand zone.
Elliott Wave Counts
The image shows a completed Wave 5, with specific Fibonacci retracement levels (0.5, 0.618) from previous swings acting as key resistance.
Wave (1) and (2) of the new cycle seem to be unfolding, indicating a continued downward momentum. The price is expected to complete Wave (3) next, which historically is the most impulsive and strongest wave in Elliott Wave Theory.
Wave 5 Validation/Invalidation Points: The chart highlights key invalidation levels for Wave 5 at 2,555.152 (1.786 Fibonacci extension) and 2,565.376 (1.618 Fibonacci extension). These points are critical in confirming the next leg down.
Fibonacci Retracement Levels
The retracement levels of 0.5 (2,646.254) and 0.618 (2,651.914) are highlighted as resistance zones. These areas are likely to act as strong rejection points if the price attempts a pullback or consolidation phase, before resuming its downtrend.
Market Structure Break & CHoCH
CHoCH (Change of Character) is marked on the chart, signaling the shift from bullish momentum to bearish dominance. A Market Structure Break (MSB) also indicates the likelihood of further downside.
The price is expected to continue lower after the market failed to break above resistance.
Relative Strength Index (RSI) Divergence
The RSI indicator shows a bearish divergence at the top of the move, meaning the price has made a higher high, but the RSI has failed to do so, signaling weakness in the uptrend.
The RSI also shows a potential downward trend, suggesting that momentum is aligned with the expected bearish price action.
Projection for Next Week
Based on the technical analysis outlined above, the outlook for XAUUSD next week is predominantly bearish. Here's what is expected:
Continuation of the Downtrend:
The completed Wave 5 of the Elliott Wave count, along with Wyckoff Distribution, indicates that a further decline is expected, especially if the current invalidation points hold. The next potential target for the downside could be around 2,555.152 (Fibonacci 1.786 extension).
Retest of Resistance:
A minor pullback could occur towards the 0.5 Fibonacci level (2,646.254) or 0.618 Fibonacci level (2,651.914), which could offer shorting opportunities. However, if these levels hold as resistance, it will confirm the downtrend and a continuation lower is probable.
Completion of Wave (3):
Elliott Wave analysis suggests that the market is still in a larger impulsive move to the downside. A continuation of Wave (3) could accelerate the selling pressure. A target around the 1.618 extension level of 2,565.376 seems reasonable, with a deeper drop possibly testing the 1.786 level at 2,555.152.
Invalidation Levels:
The chart clearly shows invalidation points. If the price moves above 2,670.240 (signaling a failure of the bearish structure), the bearish outlook will be invalidated, and the market could begin a new bullish cycle.
Market Sentiment & Risk Factors:
Fundamental news and external factors, such as economic data or geopolitical events, may influence price action, especially given gold's role as a safe-haven asset. Traders should keep an eye on U.S. economic data and Federal Reserve commentary, which could affect the sentiment.
Conclusion
The technical analysis suggests a bearish continuation for XAUUSD next week, with a strong probability of testing the 1.618 Fibonacci extension level at 2,565.376. Any pullbacks towards resistance levels (0.5 or 0.618 Fibonacci retracement) may offer shorting opportunities, but invalidation levels should be carefully watched. Traders should be prepared for potential volatility, especially if critical resistance or support levels are breached.
Wyckoff Phases & Distribution
Phase B of the Wyckoff Method: This is a critical phase where the price makes a Secondary Test (ST), followed by an Upthrust (UT), indicating buyer exhaustion and distribution by smart money.
Upthrust After Distribution (UTAD): The price has potentially completed a UTAD, signaling the completion of the distribution phase and that a markdown phase is imminent.
Sign of Weakness (SOW) in Phase B: The SOW suggests that sellers have gained control of the market, leading to lower highs and breaking the demand zone.
Elliott Wave Counts
The image shows a completed Wave 5, with specific Fibonacci retracement levels (0.5, 0.618) from previous swings acting as key resistance.
Wave (1) and (2) of the new cycle seem to be unfolding, indicating a continued downward momentum. The price is expected to complete Wave (3) next, which historically is the most impulsive and strongest wave in Elliott Wave Theory.
Wave 5 Validation/Invalidation Points: The chart highlights key invalidation levels for Wave 5 at 2,555.152 (1.786 Fibonacci extension) and 2,565.376 (1.618 Fibonacci extension). These points are critical in confirming the next leg down.
Fibonacci Retracement Levels
The retracement levels of 0.5 (2,646.254) and 0.618 (2,651.914) are highlighted as resistance zones. These areas are likely to act as strong rejection points if the price attempts a pullback or consolidation phase, before resuming its downtrend.
Market Structure Break & CHoCH
CHoCH (Change of Character) is marked on the chart, signaling the shift from bullish momentum to bearish dominance. A Market Structure Break (MSB) also indicates the likelihood of further downside.
The price is expected to continue lower after the market failed to break above resistance.
Relative Strength Index (RSI) Divergence
The RSI indicator shows a bearish divergence at the top of the move, meaning the price has made a higher high, but the RSI has failed to do so, signaling weakness in the uptrend.
The RSI also shows a potential downward trend, suggesting that momentum is aligned with the expected bearish price action.
Projection for Next Week
Based on the technical analysis outlined above, the outlook for XAUUSD next week is predominantly bearish. Here's what is expected:
Continuation of the Downtrend:
The completed Wave 5 of the Elliott Wave count, along with Wyckoff Distribution, indicates that a further decline is expected, especially if the current invalidation points hold. The next potential target for the downside could be around 2,555.152 (Fibonacci 1.786 extension).
Retest of Resistance:
A minor pullback could occur towards the 0.5 Fibonacci level (2,646.254) or 0.618 Fibonacci level (2,651.914), which could offer shorting opportunities. However, if these levels hold as resistance, it will confirm the downtrend and a continuation lower is probable.
Completion of Wave (3):
Elliott Wave analysis suggests that the market is still in a larger impulsive move to the downside. A continuation of Wave (3) could accelerate the selling pressure. A target around the 1.618 extension level of 2,565.376 seems reasonable, with a deeper drop possibly testing the 1.786 level at 2,555.152.
Invalidation Levels:
The chart clearly shows invalidation points. If the price moves above 2,670.240 (signaling a failure of the bearish structure), the bearish outlook will be invalidated, and the market could begin a new bullish cycle.
Market Sentiment & Risk Factors:
Fundamental news and external factors, such as economic data or geopolitical events, may influence price action, especially given gold's role as a safe-haven asset. Traders should keep an eye on U.S. economic data and Federal Reserve commentary, which could affect the sentiment.
Conclusion
The technical analysis suggests a bearish continuation for XAUUSD next week, with a strong probability of testing the 1.618 Fibonacci extension level at 2,565.376. Any pullbacks towards resistance levels (0.5 or 0.618 Fibonacci retracement) may offer shorting opportunities, but invalidation levels should be carefully watched. Traders should be prepared for potential volatility, especially if critical resistance or support levels are breached.
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