XAU/USD continued to struggle to break out of the bearish channel formed on June 16. In the European session, the price reached the top of the downtrend channel at around 1,840. Below this level, gold is under strong downward pressure. The metal is currently trading at 1,831 around the 21 SMA with a bearish bias.
At the opening of the negotiations on June 27, gold left a GAP at 1,826. This has not been covered. Gold is likely to extend its fall in the next few hours and could close this gap. It could even reach the support of 1,818.
The recent sharp drop in commodity and energy prices appears to have allayed fears about the risk of a further rise in inflationary pressure. It is a factor that weighs on gold that is considered a safe haven.
According to the 4-hour chart, gold has weekly support of 1,825 and monthly support of 1,818. Both levels are expected to give gold a technical rebound and it could once again reach the 1,837 area.
One last support has turned into a strong bottom for gold at around 2/8 Murray (1,812). Should gold remain under strong downward pressure, this level could be an opportunity to buy and above this level and gold is expected to resume its bullish cycle again.
Gold could turn more bullish if it breaks the downtrend channel at around 1,837 and consolidates above the 200 EMA located at 1,848. If this scenario comes true, gold could reach 4/8 Murray at 1,875 and could even reach the psychological level of 1,900.
Our trading plan for the next few hours is to buy gold at around 1,825 or around 1,818. This zone will give us an opportunity to buy gold in the hope that it will be able to make a technical bounce. Below 1,815, gold could resume its downtrend.
The eagle indicator is giving overbought signals and it is likely that in the next few hours gold will continue its downward trend and may consolidate at around 1,825-1,818.