Early in the European session, gold (XAU/USD) was trading around 2,063.65 above the 5/8 Murray and below the 21 SMA located at 2,069.83. Gold was oscillating within the downtrend channel formed on December 22nd.
Gold showed some recovery after reaching 2,057 on Tuesday during the American session. This level coincided with the bottom of the downtrend channel and the 200 EMA seen on the H1 charts.
In the coming hours, we expect gold to face strong resistance around the top of the downtrend channel located at 2,070. If this scenario occurs, this could be seen as a resumption of the bearish cycle, and the price could reach 2,057 and even reach the 200 EMA located at 2,025.
If gold breaks sharply out of the downtrend channel and consolidates above 2,072, it could continue rising and reach 6/8 Murray at 2,125.
The eagle indicator is giving a slight positive signal. To go long, we should wait for a consolidation in the next few hours above 2,062 (5/8 Murray). If this happens, the asset could gain momentum if it trades above 2,072.
The market sentiment report shows that there are 56.08% of traders who are selling gold, this signal could give a slightly bullish outlook, as our analysis goes against the general statistics.
If gold consolidates above 2,070, the outlook will be positive and we could expect it to reach 2,089, 2,100, and even 2,125 (6/8 Murray). But if it falls below this level, (2,070) we could expect a continuation of the technical correction and the asset could reach the psychological level of 2,000.
Our trading plan for the next few hours is to buy gold above 2,062 (5/8 Murray) or wait for a pullback at the top of the downtrend channel, to sell below 2,070 with targets at 2,025.
