On the 2-hour timeframe of Gold Spot (XAUUSD), the market structure shows that after a sharp bullish expansion and printing a new high, price entered a deep corrective phase. This correction was impulsive and aggressive, effectively retracing a significant portion of the prior bullish leg. The recent top, highlighted by the marked box, reflects a distribution phase and liquidity grab above previous highs. After breaking the highs, strong selling pressure stepped in, leading to a sharp rejection and a heavy bearish move. This is a classic example of a fake breakout and liquidity sweep above equal highs, often acting as a precursor to a deeper correction.
Following the sell-off, price reacted strongly to the weekly demand zone (Weekly Order Block – OB-W). This area functioned as a key structural support, showing that higher-timeframe buyers are still defending lower levels. The strong reaction from this weekly zone shifted the short-term structure from an aggressive bearish phase into a recovery and consolidation phase. We can now observe the formation of higher lows and higher highs on lower timeframes, signaling a potential short-term bullish bias.
Currently, price is approaching a significant supply zone between 5236 and 5313, which aligns with a 4-hour Fair Value Gap (FVG). This confluence area represents a critical decision point for the market. The presence of an unfilled FVG combined with previous resistance highs makes this zone highly sensitive. The first potential scenario is that price reacts within this supply zone, forms a short-term pullback, sweeps minor liquidity below recent lows, and—if the bullish structure remains intact—continues upward to break resistance and target higher levels.
In the second scenario, if we observe weakening momentum, strong rejection candles, or a break in bullish structure within this supply zone, the probability of a deeper correction increases. In that case, price could retrace toward the mid-range levels or even revisit lower support zones. Therefore, price behavior inside the 4-hour FVG box will play a decisive role in determining the medium-term direction.
Overall, as long as higher lows are preserved, the short-term bias remains bullish, with potential continuation toward higher targets around 5500–5600. However, entering long positions directly into the current supply zone without proper risk management carries higher risk. The optimal approach is to wait for lower-timeframe structure confirmation and then make decisions based on price reaction within the 4-hour zone, as this area represents the boundary between bullish continuation and the beginning of a new corrective phase.
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