Early in the European session, gold (XAU/USD) is trading around 1,894.45, above the 21 SMA, and below the 200 EMA located at 1,904. On the H1 chart, we can see that gold broke the bearish trend channel formed since August 8 and it is expected to consolidate above 1/8 Murray located at 1,890 in the next few hours.
If this scenario occurs, then the instrument could reach the 200 EMA located at 1,904 or go up to 2/8 Murray located at 1,906. 10-year US Treasury yields are trading above 4.3% as investors expect the Fed to continue raising interest rates in September 2023. Bonds and gold are inversely correlated. Since these are overbought, a fall in bonds is expected in the next few days, so it will be seen as an opportunity to buy gold.
We can see that gold is overbought according to the 1-hour chart. Hence, we could expect a technical correction to occur in the next few hours towards the 1,888 area and then from there, a technical rebound could follow.
In case the XAU/USD pair continues to rise, we could expect it to reach 1,906. We could use this opportunity to sell. The eagle indicator is showing an overbought signal. We expect gold to reach the 1,888 level and this will give us an opportunity to buy at a low price. Conversely, a sharp break below the low reached so far around 1,885, could be seen as a continuation of the downward movement. Therefore, the instrument could reach 1,875 and finally 1,867.
