Early in the American session, Gold (XAU/USD) is trading around 1,954, retreating after having reached a new high of around 1,962.56. Gold has been showing strong volatility since the Asian session and is now facing a strongly overbought zone. So, we could expect a technical correction to occur in the next few hours.
Since opening today's trading session at 1,922, gold has jumped rapidly to reach the daily high of 1,962. Gold has made a gain of more than $40. As a result, the metal has reached extremely overbought levels.
Technically, gold is in a clear reversal zone, represented by 7/8 Murray. As long as gold trades below 1,968, any attempt to break above this level could be seen as a signal to sell.
Therefore, at current price levels, we can sell gold. In case it returns towards 1,960, it could be seen as an opportunity to sell with targets at 1,937 and 1,924.
Gold could fall to about 1,922 (GAP). If it reaches 1,924 (21 SMA), it could cover this gap. From there, we could expect a technical rebound to resume its bullish cycle.
Our trading plan is to sell gold because the H4 chart is trading in an extremely overbought zone. Therefore, an imminent technical correction is likely to occur.
