Early in the American session, gold is trading around 1,926.41, bouncing after hitting a low at 1,900.77 yesterday in the American session. This strong recovery of gold reached a high of 1,930.39, the level coinciding with a strong resistance zone of September 9.
This bullish movement in gold has a fundamental aspect and is triggered by the global market sentiment since investors believe that the Federal Reserve has ended its cycle of aggressive rate hikes. This viewpoint has caused investors to stop taking refuge in the dollar and, in turn, buy gold.
The eagle indicator on the H-1 chart is giving overbought signals. Therefore, we could expect a technical correction in the next few hours and the instrument could reach 3/8 Murray at 1,921. Gold could find strong support around the 200 EMA located at 1,918 or the 21 SMA located at 1,916.
Any technical correction could be seen as an opportunity to buy gold since it clearly broke the downtrend channel. Now, the outlook could be positive in the short term and the metal could reach 1,937 and even approach 5/8 Murray at 1,953.
Therefore, we expect a technical correction in gold in the next few hours. Traders could take advantage of this correction to sell the metal below 1,930 with targets at 1,921 and 1,918 (200 EMA). The eagle indicator is giving a negative overbought signal which supports our bearish strategy.
