Early in the American session, Gold (XAU/USD) was trading at 1,708.15. We can see that the price is located below the 7/8 Murray and above the 200 EMA. The eagle indicator has reached the extremely overbought zone. A technical correction is likely to follow in the next few hours towards the 6/8 Murray or towards SMA 21 located at 1,655.
XAU/USD is struggling to settle above the psychological level of 1,700. In case of a sharp drop below this level, we could expect a technical correction to support at 1,681.
The US Dollar Index (USDX) is moving away from its lowest level since September 20, touched yesterday in the American session, which in turn is considered a key factor weighing on the price of gold. The recovery of the US dollar could increase Treasury yields, which in turn could dampen the strength of precious metals and gold could fall towards the key level of 1,650 (200 EMA).
Despite growing expectations of less aggressive monetary tightening, markets continue to price in the possibility of a 0.50% hike in December. This data could weaken gold and it could fall below 1,718.
The zone of 7/8 Murray located at 1,718 represents a possible technical reversal zone. This level is likely to generate strong bearish pressure and gold could drop to 1,681 - 1,650.
Our trading plan for the next few hours is to sell below 1,708 or in case of a pullback to 1,718, there will be an opportunity to sell with targets at 1687, 1,681, and up to the 200 EMA located at 1,670. The Eagle Indicator is in an overbought zone. Hence, a technical correction is imminent in the next few hours.
