Early in the European session, Gold (XAU/USD) is trading around 1,958.26. In the chart above, we notice a slight technical rebound after reaching a low of 1,951.82. This level was last seen on April 3 and represents a strong bottom. So, the metal is expected to continue its bounce in the next few hours and it can reach the strong resistance of 1,978.
The XAU/USD pair is oversold according to the 4-hour chart. The eagle indicator is bouncing after reaching the 5-point level, which favors a recovery in gold in the coming days.
The dollar index (USDX) is above the 21 SMA in the weekly chart, which favors a recovery in the medium term. case this trend continues, gold could reach the support zone of 7/8 Murray around 1,937 and up to the psychological level of 1,900.
On the other hand, with any recovery above 1,980, gold is likely to face strong resistance around the top of the bearish channel formed since early May around 1,990 and is likely to remain under bearish pressure below the psychological level of $2,000.
In the 4-hour chart, we can see that the area of 1,978 has become a key level for gold. In case the price reaches this zone in the next few hours and fails to break above, it could be seen as a signal to resume sell positions. The price could reach 1,951 and finally fall towards the bottom of the downtrend channel around 7/8 Murray located at 1,937.
Our trading plan for the next few hours is to buy gold above 1,951. We expect a further bounce and the price can reach the pivot point around 1,965 and finally reach the resistance zone of 1,978.
In case of a retracement and if it remains trading above 1,950, will be seen as an opportunity to buy. We expect a recovery in gold in the coming hours. The eagle indicator is in the oversold zone which supports our bullish strategy.
