Gold is trading at $1,838, below strong resistance of 6/8 Murray and inside a daily uptrend channel.
On Wednesday, gold made a significant rally causing a break of resistance of 5/8 Murray at 1,828. The metal rallied early in the Asian session to hit 1,844, the highest level since Nov 22, and then began a correction.
Gold's rally seen yesterday was due to lingering concerns about inflation and volatility in yields on US Treasury government bonds.
The daily chart for XAU/USD shows that on January 10, it rose above the 200 EMA and the 21 SMA. The break of these moving averages and the confirmation of the bullish pennant pattern gave gold the momentum it needed to break 1,828 (5/8) and reach 1,843.75 (6/8).
The break of the resistance 5/8 Murray above 1,828 improved the technical picture for the metal. This zone has acted as strong resistance a few times, preventing gold from reaching 6/8 Murray.
Meanwhile, the eagle indicator is giving a bearish signal, although the price of gold is at highs of 1,840. It means that the bullish momentum remains limited, and a correction could occur in the coming days as long as the price remains below 1,843 (6/8).
A break and consolidation above 1,843 on the daily chart could resume the upside move. If that happens, we could expect gold to go up to 1,859 and up to 1,875, the price level of October 2021.
On the other hand, if gold makes a technical correction and trades back below the support zone of 1,808, we could expect an acceleration to the downside towards the 200 EMA located around the psychological level of 1,800.
Support and Resistance Levels for January 20 - 21, 2022
Resistance (3) 1,873
Resistance (2) 1,864
Resistance (1) 1,851
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Support (1) 1,831
Support (2) 1,819
Support (3) 1,795
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Scenario
Timeframe H4
Recommendation: sell below
Entry Point 1,843
Take Profit 1,828 (5/8) and 1,812 (4/8)
Stop Loss 1,851
Murray Levels 1,843 (6/8) 1,859 (7/8) 1,875 (8/8)
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