Early in the American session, gold (XAU/USD) reached the support of 1,816. This level coincides with the low of June 16.
From this level, Gold is bouncing and now trading at around 1,825. If the price manages to stay above the 21 SMA, it could continue its climb and reach the 200 EMA located at 1,835. It could even reach the top of the downtrend channel at around 1,840.
Since June 16, gold is trading inside a downtrend channel. At the opening of the American session, gold quickly retraced and fell towards the bottom of the downtrend channel at around 1,816.
US Treasury yields are trading below their highs, slightly showing a technical correction signal, which could stage a recovery in gold if the price consolidates above 1,825.
A sharp break of the downtrend channel formed on the 1-hour chart and a daily close above 1,843 could be a positive sign and gold could quickly reach 4/8 Murray located at 1,875.
Conversely, we would expect gold to continue oscillating within the downtrend channel. If it fails to break the top of the downtrend channel at 1,840, it could fall back. Also, from that point, a pullback towards 1,816 or even towards 2/8 Murray at 1,812 is expected.
The equity market is developing a rally. Since the European session, these markets along with the cryptocurrency market are showing positive dynamics. This factor is likely to help gold as investor sentiment for risk appetite is increasing.
Our trading plan for the next few hours is to buy gold above the 21 SMA located at 1,825 with targets at 1,835 and 1,840. Additionally, a sharp break above 1,843 will be a signal to resume buying with targets at 1,875. The Eagle indicator is giving a positive signal which supports our bullish strategy.