Early in the European session, Gold (XAU/USD) is trading at around 1,697. We can see the 2/8 Murray zone as strong support for gold. If the asset manages to consolidate above this level, we can expect a bullish acceleration towards the top of the downtrend channel which has been developing since August 22nd.
Yesterday in the American session, XAU/USD fell to a low of 1,688.65, due to US initial claims for unemployment benefits, reaching the highest level since April. Another factor that could exert pressure on gold is expectations that the FED will raise its interest rate by 0.75% at its next meeting in September.
In case gold breaks below 1,687, it could hit a 2021 low of around 1,675. A recovery above 1,702 and a consolidation above the downtrend channel would ease downside pressures.
XAU/USD is trading above 2/8 Murray (1,687) and below the 21 SMA located at 1,717. Gold is expected to trade within this range in the coming hours pending US employment data.
Nonfarm payrolls could give strong volatility to the market. In the next few hours, gold is expected to break and consolidate above 3/8 Murray (1,718). If the price of gold remains above this level, it could mean an acceleration to the upside and the metal could reach the top of the downtrend channel at around 1,730 which has been formed since early August.
Since August 22nd, the eagle indicator is showing a slightly bullish signal and a positive divergence. If it consolidates above this level in the next few hours, it could continue to give gold a positive signal and the precious metal could reach the 200 EMA located at 1,755.
In case gold breaks and consolidates below 1,685, we should avoid buying as the bearish cycle is likely to resume again and the price could reach the psychological level of 1,650.
On the other hand, as long as gold trades above 2/8 Murray, it will be a buying opportunity with targets at 1,717, 1,735, and 4/8 Murray around 1,750.
