Early in the European session, Gold (XAU/USD) is trading at around 1,750 below strong resistance at 8/8 Murray and above the 21 and 200 moving averages.
According to the 4-hour chart, we can see that gold got a strong bullish move due to the positive inflation data from the US. The market priced in this fact, because the Fed is determined to bring down inflation.
The decrease in the CPI rate in the US was a key factor in the positive sentiment of investors who now anticipate a rate hike of 0.50% in December.
This speculation boosted risk appetite and investors stopped taking refuge in the US dollar. After the inflation data, the dollar index and the treasury bond yields fell, favoring the strength of gold that reached levels of August 26 at 1,757.
The high that was reached yesterday in the American session around 1,757 coincides with the 200 EMA on daily charts. This zone is expected to act as a strong resistance which we could see in the coming days as gold makes a technical correction.
According to the 4-hour chart, XAU/USD is overbought. The eagle indicator is in the 95-point zone, which is a sign of an imminent technical correction in the next few hours.
Our trading plan for the next few hours is to sell XAU/USD below 1,750 (8/8 Murray) with targets at 1,718 (7/8) and the 21 SMA located at 1,706.
Additionally, a sharp break and a close on daily charts below the psychological level of 1,700 will be a clear signal to sell, with targets at the 200 EMA located at 1,673. The asset could even reach the strong support of 1,665.
