Due to the US Dollar gaining value because of fundamentals, the yellow metal's price has plummeted below the long term
By the middle of Friday's trading session gold price was below 1,310.00. Moreover, the decline was expected to continue.
On Friday, the Canadian GDP data will be out at 13:30 GMT. It is most likely set to be the event which will cause the biggest move during this week.
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XAU/USD short term forecast
The fundamental strength of the US Dollar has caused a drop of gold prices below the long term support line. By the middle of Friday's trading session on the hourly chart the metal had no support as low as 1,295.13.
Although, take into account that the 1,300.00 level will provide support. In general, there are two scenarios. First one is a simple continuation of the decline due to the lack of support.
On the other hand, such sharp moves like the one just experienced are often followed by a period of consolidation. Namely, the metal might trade sideways.
Meanwhile, take into account that the long term support line is show incorrectly on the hourly chart. First zoom out and that way load the previous price information. Then the line will have available exact reference points.
Hourly Chart
On the daily chart the ascending wedge pattern can be seen much better. It can be seen that the support of the wedge failed already on Thursday.Meanwhile, note that it is a new month and the monthly pivot points have moved. Namely, the closest pivot points were at 1,321.00 and 1,295.00.
In addition, the 55-day SMA was strengthening the support of the monthly S1 at 1,295.10.
Daily Chart
Traders ride the downwards move
Traders have been largely shorting the metal throughout last week. This week, the situation had not changed.
Since the middle of Tuesday's trading 65% of the total open position volume on the Swiss Foreign Exchange was short.
Meanwhile, the trader set up pending orders in a 1000 base point range around the metal's current price reveal additional information.
Namely, trader pending orders were mostly set to buy the commodity, as 78% of orders were set to buy.
The buy orders might be the take profits and stop losses of the short positions.