FX.co ★ Trading Signal for Gold (XAU/USD) on October 31, 2022: buy above $1,641 (21 SMA - falling wedge pattern)

Early in the American session, Gold (XAU/USD) is trading at around 1,640.21. It is trading below the 21 SMA and within the downtrend channel formed on the 4-hour chart since September 25.

A few hours ago, gold reached a low of 1,633.31, the lowest level since October 21. This minimum coincides with the bottom of the bearish channel. We can now see that the price is bouncing back and finding strong resistance at the 21 SMA located at 1641.

The outlook could remain negative for gold if it trades below 1,640 in the next few hours. On the 4-hour chart, we can see the formation of a falling wedge pattern. A sharp break above this pattern could mean a bullish opportunity and will be a good signal to buy above 1,641.

Conversely, if XAU/USD continues to trade below 1,640, we could take advantage of this technical bounce which suggests an opportunity to sell with targets at 1,631 and the 4/8 Murray support around 1,625.

The eagle indicator has reached the extremely oversold zone, hence, and a strong technical bounce is likely in the coming hours only if gold manages to consolidate above 1,641.

Our trading plan for the next few hours is to buy the metal above 1,641 with targets at 1,652 (5/8 Murray) and 1,660. Conversely, if it fails to break the 21 SMA, we could continue selling below 1,640 with targets at 1,631 and 1,625.