Gold is trading around $4,045 during Wednesday's US session, above the 21-period simple moving average (SMA) and the +1/8 Murray level, and is undergoing a technical correction following the strong momentum seen during Tuesday's US session.
Since gold is consolidating above the psychological $4,000 level and above the 21-period simple moving average (SMA), we would expect price action to help it break above the 1/8 Murray level, around $4,062. Thereafter, we could anticipate a strong upward move toward the 1/8 Murray level at $4,140, and it could eventually reach the 200-period exponential moving average (EMA) level, around $4,169.
Conversely, if gold falls below $4,023, the outlook could turn negative, and the price could drop to $3,984. We might even see it reach the lower band of the downtrend channel, around $3,925.
Given that gold has been under downward pressure for several sessions and has been consolidating above $3,984 since October 22, gold will likely rebound in the coming days; however, for that to happen, the price would need to consolidate above $4,062.
The Eagle indicator is showing a positive signal, and we believe the instrument could continue its rise in the coming days. Therefore, we should closely monitor the Murray 0/8 zone: a break above the downtrend channel could support a short-term rally toward the $4,169 and $4,300 levels.
