Early in the European session, gold (XAU/USD) is trading at 1,925.22, below the 200 EMA, below the 21 SMA, and within a downtrend channel formed in early September.
Having reached 1,953 last week, the metal began a technical correction and is now consolidating below 4/8 Murray and above 3/8 Murray representing the range zone. In the next few hours, we expect a technical bounce above 1,921 to occur and this could break the bearish trend channel. So, the price could even return to 1,950.
The market sentiment has changed and investors have lost their appetite for risk. This has caused gold to weaken and investors preferred to take refuge in the US dollar.
In case the price of gold remains bearish and falls below 1,921, we could expect a deeper fall. Hence, the instrument could reach the psychological level of 1,900 and even the low of August around 1,884.
On the other hand, a sharp break of the downtrend channel and consolidation above 1,930 on the 1-hour chart could be seen as an opportunity to resume buying with targets at 1,937 and 1,953.
The key for the next few days is to watch the 1,921 level and above. The bullish outlook could prevail and a recovery in gold is in the cards. Conversely, if gold falls below 1,920, we could expect a bearish acceleration in the next few days.
On the 1-hour chart, the Eagle indicator reached its extremely oversold level of about 95 points which means that we could expect a technical bounce in gold in the coming days and this could be seen as an opportunity to buy.
