Early in the American session, gold is trading at around 1,726 with a bearish bias below the 21 SMA and below 4/8 Murray.
Yesterday, gold recovered some of the losses when it reached 1,745. However, it failed to consolidate above the 21 SMA, which acted as a strong resistance, and is now approaching the 1,718 level.
On the other hand, investors are still digesting the words of Federal Reserve Chairman Jerome Powell. This causes investors to take refuge in the US dollar which affects the performance of gold.
The 4-hour chart of XAU/USD shows persistent bearish strength. The metal is trading below the secondary downtrend channel formed on August 23.
Meanwhile, gold remains below the 21 SMA and 200 EMA. Besides, the eagle indicator consolidates in the negative zone, which indicates the absence of buying force.
In the short term, the risk is biased to the downside. In case of a protracted decline in gold, it could find support at around the psychological level of 1,700 or it could even reach 2/8 Murray at 1,687.
On the contrary, if gold strongly breaks the 21 SMA located at 1,741, above this level it could face 4/8 Murray located at 1,750 and the top of the downtrend channel that coincides with this same level. A consolidation above 1,750 could accelerate the bullish move towards the 200 EMA located at 1,762. Above this level, gold could start a new bullish sequence.
Our trading plan for the next few hours is to sell gold below 1,735 with targets at 1,718 and 1,700. In case there is a pullback towards the top of the downtrend channel or towards the 21 SMA located at 1,741, it will be considered an opportunity to sell.