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From Euphoria to Caution: How the Hawkish Cut Reset Market Expectations - Sell Off

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Will Gold (XAUUSD) Sustain Its Upside? Key Technical Levels to Watch This Week

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Gold Weekly Outlook: Signs of a Cooling Phase After a Strong Rally

Gold prices have entered a corrective phase after an extended bullish run that drove the precious metal to record highs earlier this year. In the latest weekly close, XAU/USD settled near $3,988, falling by 3.02%, suggesting that the market may be transitioning from aggressive bullish momentum to a more balanced consolidation period.

While the broader trend remains upward, several technical indicators, including the MACD and Stochastic RSI, are now showing early signs of exhaustion. The combination of slowing momentum, declining histogram readings, and overbought oscillators indicates that gold might be preparing for a short-term pullback before any potential resumption of its uptrend.

This article provides a detailed technical breakdown of gold’s current market structure, focusing on key indicators, price patterns, and support–resistance zones, as well as the broader implications for traders and investors.

MACD Analysis: Momentum Begins to Ease

The Moving Average Convergence Divergence (MACD) indicator remains in positive territory, reflecting that the dominant long-term trend is still bullish. However, recent movements on the weekly chart suggest that the momentum is gradually weakening.

The MACD line continues to hover above the signal line, but the histogram has started to narrow, which typically serves as an early warning of a momentum shift. When this pattern develops after a strong rally, it often implies that the current bullish cycle is losing steam and that the market may be vulnerable to a short-term correction.

If this trend continues, a bearish crossover could occur within the next few weeks. Historically, such crossovers during an extended uptrend have led to corrections ranging between 5% and 10% from the recent peak. Traders should monitor this closely, especially if weekly closes begin to fall below the short-term moving averages.

Despite these signs of fatigue, the broader structure remains intact as long as the MACD does not confirm a crossover and price holds above major support zones. In other words, while short-term momentum is softening, the primary trend remains bullish until proven otherwise.

Stochastic RSI Analysis: From Overbought to Cooling Momentum

Another critical signal comes from the Stochastic RSI, which has already started to turn downward from the overbought zone. This indicator measures the speed and magnitude of recent price changes, helping traders identify potential reversals or pauses in momentum.

The latest reading shows that the Stoch RSI lines are curving lower, signaling that buying pressure has started to fade. Such behavior often occurs after an extended rally when short-term traders begin to take profits, resulting in a natural cooling phase.

Historically, when gold’s Stoch RSI exits the overbought area, it tends to trigger sideways consolidation lasting two to four weeks, occasionally followed by a mild retracement. Based on this pattern, traders can anticipate a potential pullback toward intermediate support levels, possibly around $3,820 or even $3,600, before the next wave of accumulation begins.

For swing traders, this may not be a bearish signal but rather a technical breather—a normal and healthy adjustment that allows the market to reset before continuing higher. The key, however, is how price behaves around the mentioned support areas. A decisive break below $3,600 would be an early warning of deeper correction risks.

Pattern Analysis: Rising Channel Still Intact

From a structural standpoint, the weekly chart of XAU/USD continues to exhibit a rising channel pattern that has been in place since mid-2023. This formation represents a controlled uptrend characterized by higher highs and higher lows.

The recent retracement from above $4,100 toward the current level near $3,988 marks the upper boundary rejection of this channel. Typically, such pullbacks occur as part of the natural rhythm of a trending market, where price tests the resistance line before rotating lower toward the midline or lower boundary of the channel.

This suggests that gold is not entering a bearish phase but is undergoing a technical adjustment within an ongoing bullish cycle. The structure remains valid as long as weekly candles do not close below the lower trendline, currently estimated around the $3,600 area.

If the market stabilizes near that zone and regains upward traction, gold could potentially re-test resistance levels near $4,250 and even $4,400, both of which represent psychological barriers for long-term traders.

Key Support and Resistance Levels

The following levels are critical to monitor over the coming weeks:

  • Support 1 (S1): $3,820

  • Support 2 (S2): $3,600

  • Support 3 (S3): $3,460

  • Resistance 1 (R1): $4,120

  • Resistance 2 (R2): $4,250

  • Resistance 3 (R3): $4,400

From a tactical standpoint, the $3,820–$3,600 zone acts as a strong support confluence, combining historical price reactions with the lower half of the channel. As long as the price remains above these levels, the market is still considered structurally bullish.

Meanwhile, the $4,120–$4,250 range serves as immediate resistance, corresponding to the recent swing high area where profit-taking pressure intensified. A weekly close above $4,250 would signal renewed bullish strength and could open the door toward the $4,400 region.

Broader Technical Outlook: A Pause Before Continuation

Gold’s broader technical picture suggests that the recent correction is not the end of the rally but a pause within a strong uptrend. After a prolonged period of upward momentum, markets often require consolidation to digest prior gains and reset sentiment.

This cooling phase is supported by two converging technical signals — a weakening MACD histogram and a declining Stochastic RSI from overbought conditions. Together, they indicate that while the bulls still dominate the longer-term narrative, the near-term outlook has shifted to neutral-to-cautious.

Should price action remain above $3,600, it would confirm that the correction is merely technical in nature. Conversely, a decisive break below that level may alter the short-term outlook and invite deeper pullbacks toward the $3,460 support zone.

For now, traders should approach gold with a two-tiered strategy:

  1. Short-term caution — monitor for potential bearish momentum while managing exposure.

  2. Medium-term optimism — look for re-entry opportunities once momentum stabilizes near major support.

Macro Update :

Trump Signals Progress on U.S.–China Trade Deal as Tariff Tensions Shift to Canada 

President Trump signaled optimism that the U.S. and China are close to finalizing a trade and tariff deal ahead of his Thursday meeting with President Xi Jinping in South Korea. Treasury Secretary Scott Bessent confirmed that both sides have reached a “substantial framework” expected to prevent the planned 100% tariff hike on November 1, while China may resume U.S. soybean purchases and postpone rare earth export curbs. Chinese state media echoed that progress was made in Malaysia over the weekend, describing a “basic consensus on arrangements.”

However, tensions with Canada escalated after an Ontario government ad featuring Ronald Reagan sparked Trump’s ire, leading him to threaten an additional 10% tariff on Canadian imports. Despite Ontario Premier Doug Ford’s move to pause the ad, Trump called Canada’s actions “egregious.” Meanwhile, reports suggest the U.S. is nearing a separate trade deal with India, while the White House is also easing auto tariffs at home. The Supreme Court is expected to hear a major challenge to Trump’s broader tariff policy in early November, a ruling that could redefine the administration’s trade strategy.

Final Thoughts

The technical setup for XAU/USD highlights a market that is transitioning from acceleration to stabilization. Momentum indicators are softening, and a short-term correction seems likely, yet the dominant trend remains intact.

Traders should maintain vigilance around the $3,820–$3,600 support zone, which will likely determine whether gold resumes its advance or extends its correction. Meanwhile, resistance near $4,120–$4,250 will remain a key barrier to overcome before a new leg higher begins.

In essence, the market appears to be entering a cooling phase within an otherwise resilient long-term uptrend. Patience and disciplined positioning will be essential as gold consolidates recent gains and prepares for its next move.





Disclaimer:
This article is for informational purposes only and should not be considered financial advice. All analyses are based on technical indicators and publicly available data. Market conditions are subject to change, and readers are encouraged to conduct their own research or consult a licensed financial advisor before making any investment decisions.

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