Early in the American session, Gold (XAU/USD) is trading around 1,648.81 with a bullish bias. A technical correction towards the 21 SMA is expected to resume the bullish move.
According to the 4-hour chart, we can see that gold sharply broke the downtrend channel which has been in progress since September 30. In case gold consolidates above 1,630 in the coming days, we could expect the bullish cycle to resume and it could reach the 200 EMA located at 1,677.
Gold made a strong advance when it hit the bottom of the downtrend channel at 1,616. This level gave it a strong bullish momentum and the price reached the resistance zone of the 1,670 zone, a level that coincides with the 200 EMA and the top of the downtrend channel.
The 4-hour chart shows that the risk remains biased to the downside as long as gold continues to trade below the 200 EMA located at 1,677. Any technical bounce will be considered an opportunity to sell.
A daily close above 1,680 and above 6/8 Murray located at 1,687 could mean a new start of a bullish cycle and gold could reach the psychological level of 1,700 and could even reach 8/8 Murray at 1,750.
Conversely, in case gold falls and makes a close below 1,635 on the 4-hour chart, we could expect the bearish cycle to resume and gold could reach the 4/8 Murray support at 1,625 and could even drop to the bottom of the downtrend channel around the psychological level of 1,600.
Our trading plan for the next few hours is to buy gold around 1,638 with targets at 1,656 (5/8 Murray) and 1,677 (200 EMA). The eagle indicator is showing a positive signal. A technical correction is likely to occur in the short term. The price above 1,638 (21 SMA ) will be seen as an opportunity to buy.
