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XAU/USD remains firm at the beginning of the American session and trades are approaching the area of 1,845. This week, gold had made a strong recovery and could close the first bullish week after four previous negative weeks.
XAU/USD is being supported by increasing positive stock market sentiment reflected in major Wall Street indices, and US Treasury yields, which are correcting away from their highs.
Gold has been trading inside an uptrend channel formed on May 16 when it hit a low of 1,786.70.
On the weekly chart, gold has made a strong upward move of over $60. This is a positive sign. Gold is likely to continue its uptrend in the coming days and could reach the 200 EMA around 1,878.
On the weekly and 4-hour charts, the metal is facing strong resistance around 1,875-1,888, where the 200 EMA is located. It will be a strong barrier for gold if it attempts to continue its uptrend.
In case of a sharp break above 1,888, it could be a clear signal for a further bullish move and the price could quickly reach 7/8 Murray at 1,937 and even the psychological level of $2,000.
On the contrary, the price could make a pullback towards the 200 EMA (1883) area on the weekly or H4 charts (1,878). If the price fails to break above it, we will have a clear signal to sell and gold could resume its main downtrend.
Our trading plan for the next few hours is to wait for a technical bounce around the 21 SMA at 1,826 in order to buy with targets at 1,857. In case of a pullback to the top of the uptrend channel at around 1,857, it will be a signal to sell.
The eagle indicator has reached the 95-point zone which represents the extremely overbought level. The metal could go through a technical correction in the next few hours and it could reach the support of 1,820.
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