XAU/USD Analysis – Breaking 3340 dollars puts sell pressure on gold, is the retracement sell strategy effective?

XAU/USD Analysis – Signs of Significant Trend Change Indicated by Break Below $3340 [Gold 1-Hour Chart]

Overview (May 8, 2025)

As of May 8, 2025, XAU/USD (Gold/US Dollar) has declined to $3340.15 per troy ounce. This represents a correction of approximately $100 from the previous day's high of around $3440, technically attributed to "profit-taking after a sharp rise" and "selling on rallies from resistance." Currently, the price is moving below the short-term moving average, indicating increasing downward pressure, as confirmed on the cTrader chart.

Furthermore, indicators such as ADX and DMI, which show trend strength and direction, also exhibit a clear bearish tilt, necessitating caution regarding potential downside risks. Notably, the break below $3340 is a short-term support breach, bringing attention to the next technical targets at $3330 and the psychological level of $3300.

Key Point 1: Clarification of Bearish Shift Indicated by Moving Average (MA) Structure

On the chart, the blue line represents the 50-hour moving average, and the red line represents the 200-hour moving average. Until May 7, the 50MA was gradually rising, suggesting a continued uptrend. However, from the morning of May 8, the price clearly broke below the 50MA, with candlesticks mostly positioned below this line.

This break below the 50MA often serves as a signal of "end of uptrend" for short-term traders, leading to position liquidation or reversal selling. Additionally, the candlesticks are currently testing contact with the 200MA (around $3330), drawing attention to whether this level will serve as the final defense line.

Key Point 2: Trend Reversal Process Indicated by ADX and DMI

The ADX (yellow line) displayed at the bottom of the chart approached 0.20 during the morning rise on May 7 but subsequently declined back to around 0.15, now showing signs of rising again. This suggests that the market "paused trend acceleration once but is now forming a new movement."

Moreover, in the DMI, the –DI (red line) is clearly surpassing the +DI (green line), indicating a dominant "selling" direction. Particularly, the pattern where +DI is flat to downward while –DI is rising is considered a strong bearish signal, simultaneously indicating "negation of uptrend" and "signs of downtrend." If ADX clearly exceeds 0.20 again, it will be regarded as a confirmation of a downward trend.

Key Point 3: Consistency Between Volume and Price Action

Volume tends to increase during price declines, which was particularly evident during the large bearish candlestick from 11:00 to 12:00 on May 8. During this period, it is believed that short-term long positions were stopped out, and new shorts entered, making support breaks amid increasing volume an important factor supporting trend continuation.

Conversely, the rise during decreasing volume between 07:00 and 10:00 on May 8 is interpreted as a "weak rebound," likely to be sold again, providing a basis for a selling-on-rallies strategy.

※Image Source: cTrader Platform

Future Outlook and Key Levels

The future price movement of XAU/USD is expected to change significantly based on the battle around the following price ranges:

• Break of $3340: Already breached; attention on whether this level turns into resistance.
• $3330 (around 200MA): If broken, the psychological level of $3300 becomes a focus.
• $3360 (recent high): Unless this level is recovered, upward pressure remains limited.
• ADX exceeding 0.20: Confirmation point for trend intensification. If exceeded, the downward momentum is likely to strengthen.

Trade Scenario Examples

Bearish Scenario (Selling on Rallies Strategy)
Entry: Sell entry on a return to $3340–$3345 (confirm reversal with bearish candlestick)
Take Profit Target: $3300–$3285
Stop Loss: Above $3360 (clear break above recent return high)

Bullish Scenario (Short-Term Rebound Target)
Entry: Long after confirming a rebound candlestick (pin bar or engulfing) around $3330
Take Profit Target: $3360 (return to 50MA)
Stop Loss: Below $3320 (break of recent low)

Summary:

XAU/USD may have ended its short-term uptrend and is now possibly entering a "trend reversal phase from correction." The structure of moving averages, the arrangement of ADX and DMI, and changes in volume all lean towards a downward direction, making it effective to build strategies centered on selling on rallies. Particular attention should be paid to the battle around $3330 and the movement of ADX. Calm trading decisions are required by comparing technical indicators and price action.

Disclaimer:

This article is intended to provide information based on the cTrader chart and does not constitute investment advice or trading recommendations. Trading in financial markets involves risks, and final decisions should always be made at your own responsibility.
For the latest analysis of gold and other major currency pairs, please also check the FIXIO blog, which is updated regularly.