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