In the European pre-market, XAU / USD is trading below $1,775. This level coincides with the 8/8 of Murray, and below the SMA of 21. If in the next few hours, the price remains below the moving average, there could be a downward correction.
This resistance of $1,875 (8/8) is the key level as it acts as a strong barrier and keeps the price under downward pressure. Furthermore, we can see the last candles showing a consolidation range between $1,875 - $1,864.
The USDX dollar index reached its low of 89.64, the level of February 25. Now from that level we are noticing a strong technical rebound which could weaken gold and there could be an imminent correction in the next few hours.
Gold also found support in recent weeks from continued tensions in the Middle East and the rise in covid cases in Asia and the resulting lockdowns, which dampened expectations of a faster global economic recovery.
On the other hand, gold bulls need to break out and consolidate above $1,875 on a sustained basis to extend their move towards the psychological level of $1,900.
If it cannot break above 8/8 murray, the Gold has support at 7/8 murray around $1,843 that is the immediate support for XAU / USD.
Our recommendation is to sell the asset if there is a pullback to the $1,875 zone, or a trade below $1,868, with targets at 7/8 around $1,843.
The technical reading of the eagle indicator in 1-hour charts is showing a bearish signal moving away from the overbought zone. It is likely that there will be a technical correction in gold in the coming days.
Support and Resistance Levels for May 19 – 20, 2021
Resistance (3) 1,886
Resistance (2) 1,880
Resistance (1) 1,875
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Support (1) 1,863
Support (2) 1,855
Support (3) 1,849
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Trading tip for XAU/USD for May 19 - 20, 2021
Sell bellow $1,868 (SMA 21), with take profit at $1,843 (7/8), stop loss above $1,875.
Sell if pullback $1,875 (8/8 of murray), with take profit at $1,855 and $1,843 (7/8), stop loss above $1,880.
The material has been provided by InstaForex Company - www.instaforex.com