Early in the European session, Gold (XAU/USD) is trading at around 1,649, bouncing slightly having bottomed out at 1,639. It is currently trading below the 21 SMA (1,668) and below the 5/8 Murray (1,656).
The outlook could remain negative for XAU/USD. In case there is a pullback to the top of the downtrend channel and failure to break, it will be a clear signal to sell with the target at 4/8 Murray located at 1,625.
The eagle indicator is approaching a key oversold zone (10-5 points). It is likely that there will still be a bearish sequence in gold in the coming days until it reaches oversold levels.
Elevated inflation is likely to keep the Fed in a tightening cycle and this is likely to put pressure on gold as rising interest rates should reinforce the US dollar's strength.
A sharp break below 1,639 could quickly drop gold towards the 1,625 support. Around this area, we could expect a technical bounce which could once again provide bullish momentum.
On the other hand, a daily close above the 21 SMA and a break of the downtrend channel around 1,670 could mean a rally for gold and it could reach 6/8 Murray at 1,687 and even rally towards the psychological level zone of 1,700 around 7/8 Murray (1,718).
According to the 4-hour chart, gold maintains a downtrend channel formed since September 30. This channel is still intact. In case there is a pullback towards the 1,668 area, it is likely to be considered an opportunity to continue selling, with targets at 1,635 and 1,625 (4/8).
Relevance up to 06:00 2022-10-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
