Early in the American session, gold is trading around 4/8 Murray located at 1,750. This level is key as this is where the pivot point lies. If gold trades above this level, there is a chance that there will be a technical bounce and it could reach the top of the downtrend channel around 1,762.
XAU/USD is trading inside a downtrend channel formed since August 10. The bias remains negative but the price has reached the oversold zone. A technical bounce is likely in the coming days if gold trades and consolidates above 4/8 Murray.
Risk aversion is putting gold under downward pressure. Investors are optimistic due to the fact that the Fed is going to increase its interest rate in September between 0.50% - 0.75%.
The US dollar is favored on all fronts. USDX trades around 108.00, reaching highs from July 15th. The US 10-year bond yield hit a high of 2.95%. All this is putting gold under downward pressure. Yet, a correction in USDX and in bonds could favor the technical rebound of gold, and it could reach the resistance zone of 1,762 and 1,773.
In the event that XAU/USD closes below 1,750 (4/8), we could expect the decline to continue, and the quote could reach the bottom of the downtrend channel around 1,730.
On the contrary, a sharp break of this downtrend channel and a close above 1,762 could favor a recovery in gold and it could reach the 200 EMA located at 1,773.
A return above 1,775 could mean a resumption of the bullish movement, and gold could reach the psychological level of 1,800 and even the 6/8 Murray level at 1,812.
Our trading plan for the next few hours is to buy gold above 1,750 with targets at 1,762 and 1,773. The eagle indicator is in an oversold area which supports our bullish strategy.