XAU/USD rallied yesterday, breaking above the key resistance (now turned into support) barrier of 1931. The jump was stopped at 1953, and then the metal retreated somewhat, but today, the bulls regained control near 1936, driving the price above 1953. Overall, the yellow metal is trading above an upside support line drawn from the low of October 29th, and thus, we would consider the short-term outlook to be positive.
If the bulls are willing to stay in the driver’s seat, we would expect them to target soon the high of September 16th, at around 1974. They may decide to take a break after challenging that barrier, thereby allowing the price to correct lower. However, as long as it would be trading above the aforementioned upside line, we would see decent chances for another leg north. If this time the 1974 area is broken, the next stop for the bulls may be the 1993 zone, which is defined as a resistance by the high of September 1st.
Taking a look at our short-term oscillators, we see that the RSI turned up and moved back above its 70 line, while the MACD lies above both its zero and trigger lines, pointing up as well. Both indicators detect strong upside speed and support the notion for this precious metal to continue drifting north for a while more.
On the downside, we would like to see a decisive slide below 1916 before we abandon the bullish case. Such a move would also take the price below the pre-mentioned upside line and may encourage the bears to target the 1887 obstacle, which is slightly above Wednesday’s low and is marked by Tuesday’s trough. Another break, below 1887 may extend the decline towards the low of September 28th, at around 1869.
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