A divergence is a situation when the price and the MACD indicator are moving in opposite directions, indicating a possible trend reversal or continuation¹. There are two types of divergences: regular and hidden².
To determine if XAUUSD is exhibiting a divergence using MACD, you need to compare the highs and lows of the price with the corresponding peaks and troughs of the MACD line. The MACD line is the difference between two exponential moving averages (usually 12 and 26 periods) of the price³.
According to the web search results, the MACD line for XAUUSD is shown in blue, and the signal line (a 9-period exponential moving average of the MACD line) is shown in red³. The zero line is the horizontal axis where the MACD line crosses when the two moving averages are equal.
A regular divergence signals a possible trend reversal. A bullish regular divergence occurs when the price makes a lower low, but the MACD line makes a higher low, indicating that the downward momentum is weakening². A bearish regular divergence occurs when the price makes a higher high, but the MACD line makes a lower high, indicating that the upward momentum is fading².
A hidden divergence signals a possible trend continuation. A bullish hidden divergence occurs when the price makes a higher low, but the MACD line makes a lower low, indicating that the upward trend is still strong². A bearish hidden divergence occurs when the price makes a lower high, but the MACD line makes a higher high, indicating that the downward trend is still intact².
Based on the latest data from [MACD strategy working on GOLD (XAUUSD)](^3^), the price of XAUUSD made a higher high on January 4, 2024, but the MACD line made a lower high, forming a bearish regular divergence. This suggests that the uptrend may be reversing soon. However, this is not a trade signal by itself, and other factors such as the signal line, the zero line, and the overall market conditions should also be considered before making a trading decision.
Source: Conversation with Bing, 1/5/2024
(1) MACD Indicator Analysis Gold Trading Signals - MACD Gold Indicator .... https://www.tradegoldtrading.com/gold-trading/index.php/macd-gold-indicator.
(2) Divergence Cheat Sheet - BabyPips.com. https://www.babypips.com/learn/forex/divergence-cheat-sheet.
(3) MACD strategy working on GOLD ( XAUUSD) » MacdTrader.com. https://macdtrader.com/macd-strategy-working-on-gold-xauusd/.
(4) MACD strategy working on GOLD ( XAUUSD) » MacdTrader.com. https://macdtrader.com/macd-strategy-working-on-gold-xauusd/.
(5) Movingaverageconvergencedivergence — Indicators and Signals .... https://in.tradingview.com/scripts/movingaverageconvergencedivergence/.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
