Early in the European session, the price of gold (XAU/USD) is trading around the 21 SMA, below the downtrend channel formed since January 16. According to the 4-hour chart, gold is trading under bearish pressure. As long as it trades below 1,910 (21 SMA), it is expected to fall and reach the bottom of the uptrend channel around 1,885.
Gold is likely to trade below 1,910, so it is a clear signal to sell, with targets at 1,885 and 1,875 (8/8 Murray). The latest H-4 candlesticks show that gold is about to have a strong technical correction in the coming days.
The key will be to wait for the XAU/USD pair to fall below the 21 SMA (1,910) and +1/8 Murray located at 1,906. In case this scenario comes true, it is likely that gold will fall to the bottom of the uptrend channel around 1,884 and could even reach 8/8 Murray at 1,875.
According to the 4-hour chart, we can see that gold is very overbought. Hence, this is a sign that as long as it trades below 1,910, it could be used as a selling opportunity.
On the contrary, if gold breaks and consolidates above 1,911, the bullish cycle is expected to resume and the metal could reach 1,925 (weekly resistance) and even +2/8 Murray at 1,937.
If gold remains trading below 1,910, any bounce will be seen as a selling opportunity and we could expect a decline to support levels of 1,828, that is where the 200 EMA is located.
Our trading plan for the next few hours is to sell while the XAU/USD pair trades below 1910, with targets at the psychological level of 1,900, and 1,875. The eagle indicator is showing an overbought signal which supports our bearish strategy.
