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Early in the American session, Gold (XAU/USD) is trading around 1,894.28 above the 21 SMA and above the 1/8 Murray. Gold remains under bearish pressure and has consolidated above 1,890, a key level that could serve as support in case of a strong technical bounce.
Yesterday gold reached a low of 1,884.74. This level coincided with the bottom of the downtrend channel, which offered an opportunity for a technical bounce. Now we see a consolidation which means that gold could continue its recovery in the coming days.
In the next few hours, it is expected that gold can consolidate above the 21 SMA and 1/8 Murray. Then, it will be seen as an opportunity to buy with targets at 1,910 and 1,921.
On the H1 chart, we can see the formation of a head&shoulders pattern. This signal will be confirmed if gold breaks above 1,900, then we could expect a bullish acceleration and the instrument could reach the 1,921 level.
On the other hand, in case gold falls below 1,890, it will be a sign of a resumption of the bearish movement and we could wait for the price to fall towards 1,885 and even to 0/8 Murray at 1,875.
Our trading plan for the next few hours is to buy gold above 1,890 and wait for the consolidation above 1,891 (21 SMA) with targets at 1,900, 1,910, and 1921.
On August 17, the instrument reached the extremely oversold zone. Since then, it has been giving a positive signal which could be seen as an opportunity to buy in the short term.
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