XAUUSD at 3,962 low — bounce setup or breakdown to 4,023? | Gold June 25

Hey, this is Daniel, your prop trader. Gold has now reached the Tokyo session's target low, so from here I think there's a strong chance we see a rebound higher. What I'm watching is a breakout from the current monitoring range.

Yesterday played out exactly as expected, forming a clean sell setup first. We've confirmed a roughly 1330 pip slide running into the New York session open. In the Tokyo session we've reached the limit of recent downside, so now watch for a bounce.

Alright, let's get right into it and start breaking down that daily candle we were just talking about. On the daily, gold closed the prior session with a big bearish candle, and right now it does look like the selling has stalled out for the moment. Back on the 22nd I talked about this channel line, and at first the lower bound was holding, but the scenario I laid out was that this width would expand from here.

I think that's exactly what's playing out now. If you go back and rewatch the video from the 22nd, I explained that when downward momentum strengthens, this channel line would expand. That scenario played out earlier than expected.

Originally, the low I had penciled in for yesterday sat right around the low of this recent big bearish candle here. I figured the decline would stall right around here, but the downward momentum turned out far stronger than I had expected. It pushed lower and ended up testing the lower channel line directly.

On the other hand, it touched the lower channel line and printed a wick there, and from that point a fresh downswing started to develop into the move. It bounced right around one candle's worth there, and once that new downswing formed, the move from the first leg to the second leg tends to stall at the same width. Since that theory applies here, we treat this leg as the measured move, and from this same high we can project the exact same width down to mark the next target level.

Applying that rule, we land right around the point where price has slightly overshot the measured move target, just a touch beyond it. So it wouldn't be strange for the drop to stall around here for now, and that's true from both the channel line and the measured move. So there's still room for a bounce here, and as I said at the start, around the daily level I'm staying cautious and watching for a rebound.

As for the timeframe, let's look at the 1H chart now. Yesterday, for our community members, the part I walked through is this red line section right here. Going forward, let me walk you through what I was talking about.

It'll only be partial, but I want to share a bit of it with you here. So first, going back to yesterday on the 1H chart, what I was watching closely was the formation of this reversal zone right here around this area. At the time I sent this out, I was right at the red line area, so even though only the high had been confirmed at that point and nothing else was locked in yet.

The point where this red line printed that long upper wick lines up with the trading range built off these two recent candles as the base candles. I marked it as an order block, labeled OB on the chart, since it's a zone likely to react, and price left that long upper wick right there. On the flip side, the larger structure is a clean downtrend, and price even slightly overshot the recent channel here.

This bounce here printed a doji right at the key line, and on this second attempt to reverse, the upside momentum looked very weak, which I'd flagged as a clear sign of exhaustion. So once that reversal pattern formed, the bias flipped to the downside, and we had a clean setup to start looking for shorts here. Without a clear bearish reversal in price action, I said the downside bias would simply stay intact.

Now if we follow what actually happened next, price reversed cleanly, and just as I called it, it dropped from right here all the way down to here. That's a move of about $133, which works out to roughly 1330 pips to the downside. We also review the previous day's price action inside the community, so you can take what you learn and apply it directly to your next trades.

Let me touch on parts of that as well, so first things first, let me walk you through it. This sits just ahead of yesterday's reversal level, and what I was watching closely was this doji forming right inside that zone. Once that downswing finally wraps up here, price prints this key doji and then sets up a bounce off the level.

Looking inside, this is a classic two-leg correction — you can call it an ABC, whatever works. I personally call it a two-leg correction, so let me stick with that term here. First upswing, then its correction, and the second upswing is now getting going.

We get an inside doji forming here, the kind of move that looks set to pin down the high. It's a sideways range here with that doji, so this just keeps going. This candle breaks out cleanly, then the next one gives a neat pullback move.

On top of that it's an inside bar, with the high and low sitting at nearly the same level. Even just on the 1H chart alone, this candle gave us a clean entry setup here. The downside follow-through kept going, and inside that move what we saw was this.

The first reversal candle is this inside bar, forming an inside bar with a long lower wick. Normally I'd want to go long above here, but price still hadn't broken the descending trendline. So first off, this doesn't qualify as a clean buy signal, while the bulls who jumped in at that half-baked spot And as this candle that flipped to an inside bar shows, traders who entered at the upper wick end up holding losing positions as price slides down to retest the lower wick Once downside follow-through kicks in, after the high set by that doji candle A second reversal attempt gets tested here, but as I mentioned, it's a weak reversal candle

It forms a key doji here, and from that doji we get a breakout pushing higher Then we get one follow-through candle, but it ends up forming a reversal high here At this point you can at least expect price to come back and test this level again This sideways range broke to the downside, so the downtrend kept extending lower The move pushed lower in this fashion, and in the end we got a drop of roughly 133 dollars It's shaping up as a downward move,

and as always I sent a note to the community today Everything's going to plan, and this looks like a key juncture as we enter a bounce phase I broke down the exact conditions for that inside the community, and the other scenario is this downtrend simply continuing on A breakout from this supporting bear channel is also a real possibility here In cases like this, where do we look to decide between these two scenarios? We compared both scenarios, looked at what the buy setup could be, and even the exact entry point.

I broke it down in detail, and for gold today, we're at a key daily level. We've reached it, so for now I'm watching closely for a bounce here. That wraps the gold update.