The XAUUSD H4 chart shows a rising wedge pattern (parallel turquoise lines). This formation is a continuation pattern, i.e. after it resolves, it is expected to continue in the direction of the previous impulse, which was down. Technical analysis suggests that flags fly at half-mast. This phrase means we can apply a measured move to arrive at a potential pattern target.
In this case, the target is $1,730, a decline of just over 6%. However, we caution that measured moves are not "carved in stone." This shifting is because market variables are constantly in flux as new information discounts. As such, the price may or may not achieve the target.
However, we consider the pattern's breakdown as a bearish development. The stochastic is below 20, which suggests weak momentum. The longer this level or below is maintained, the more plausible the target.
The precious metal is under pressure from a rampant dollar. However, gold benefitted from the greenback's pause following an overbought condition. This has now normalised, and if the dollar finds support, it will contribute to the unwinding of the XAUUSD continuation pattern.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.