Early in the American session, XAU/USD is trading around 1,668. You can see that gold reached the 200 EMA located at 1,674 and it cannot break it. So, we see a technical correction.
Risk appetite and disappointing US data make investors revise their forecast of further monetary tightening in favor of sharper rate hikes by the Federal Reserve.
Additionally, the decline in US Treasury bond yields continues to weigh on the US dollar. This is a factor that supports the rise in gold.
However, the Fed is still expected to continue raising interest rates in the near future to combat persistent inflation. On November 2, an increase of 0.75% is expected and the official funds rate could reach 4%. This, in turn, could prevent traders from opening aggressively bullish positions on gold.
According to the 4-hour chart, we can see that gold has a strong resistance around the 200 EMA located at 1,674. From a technical point of view, this area represents strong resistance and below this level, we expect a technical correction towards 5/8 Murray at 1,656. Hence, the gold price could even reach the bottom of the uptrend channel that coincides with the 21 SMA at 1,650.
On the other hand, in case gold asserts its strength, we should expect a close on daily charts and a break above 1,680 to buy with targets at 1,687 (6/8 Murray) and 1,718 (7/8 Murray). This level coincides with the high of October 3.
Our trading plan for the next few hours is to sell gold below 1,674, with targets at 1,660 and 1,650. Additionally, we can expect a technical bounce at around 1,650 to buy with targets at 1,674.
XAU/USD is likely to trade in a range between 1,675 (200 EMA) and 1,645 (21 SMA) in the coming days. The asset is trapped sideways because investors are waiting for US macroeconomic data to be released next week.
