Early in the European session, gold is trading around the 200 EMA located at 1,764. After sharply breaking the downtrend channel, gold is now reaching a strong resistance zone and a technical correction is likely in the next few hours.
According to the 4H chart, gold has resumed its bullish bias. It rose after breaking above the 21 SMA located at 1,725.
The technical indicators crossed their mid-lines into positive territory. A descending trend line on daily charts that was formed on June 13, offers resistance around the area of 1,790 which coincides with the 5/8 Murray line.
Risk appetite is intensifying after Powell's speech, which gave no details regarding the upcoming interest rate hike. This is evident with stocks rising. The US stock indices are hitting new monthly highs and moving away from the bearish territory.
In the next few hours, gold is expected to continue to rise. In case of a sharp break above the 200 EMA, it is likely to reach the top of the uptrend channel around 1,776.
If the XAU/USD pair fails to break above the 200 MA located at 1,764, a technical correction to 4/8 Murray at 1,750 is expected and it could continue the decline towards the 21 SMA located at 1,731.
Our trading plan for the next few hours is to sell below 1,764 (200 EMA) or in case of a pullback around 1,776-1,781 (5/8 Murray) to sell, with targets at 1,750 and 1,731. The eagle indicator is showing extremely overbought signals thus supporting our bearish strategy.
