XAU/USD is going to break out...it will simply HAVE to at some point in the very near future. The range the pair is trading is is growing increasingly smaller with higher lows and lower highs every week forming a giant wedge formation on the Daily, Weekly and most predominant, the Monthly Chart. The current range is now down to between roughly 1550 to 1600 with the high edge of the formation placing the pair at about 1610 before reversing and testing the lower end of the range again. As the trad-able range deteriorates, a break out will be forced upon the pair,and it is far more probable to see the pair break higher than lower. To break lower would mean that the USD is gaining in value massively, and based on the daily financial reports this is highly unlikely. The far more probable scenario is the pair break the formation to go higher as Gold itself is currently undervalued according to most economists. Some reports suggest that Gold itself, if valued properly should be trading at around $8000/ounce...which would certainly over power the US Greenback. I have said it before, I believe a Bullish breakout is setting up based on this chart pattern, which if viewed on a Monthly chart shows a clear flag pole and flag or pennant formation, which is typically considered by technical traders to be a continuation pattern in the original direction...UP in this case. The last 2 days have both printed hammers (or pin bars) which often indicate higher prices to come, but the question is...how high? Start with the top of the range as previously mentioned at 1600-1610 where the top of the channel resides. Beyond that there is resistance at 1613.89, 1628.92 & 1643.81...below the current price, which at time of writing is 1584.16 there is support at 1582.54, 1566.22 & 1550 which has been probed many times, each time traders reject the price and it turns higher. At this point, if a bullish break out occurs price will need to close above 1614 on a Daily time frame or higher, and below 1550 for a Bearish breakout, but until then, we can trade within the range as we have been doing since early May.
Happy Trading!