In the European session, gold (XAU / USD) is trading at the key level of +1/8 of murray, an extremely overbought zone and strong resistance, which coincides with the psychological level of $ 1,900. Gold hit a 4-month high at $ 1,909.70.

Gold has strengthened due to a fall in the yields of the US Treasury bonds and the US dollar (USDX), reaching lows below the psychological level of 90.00, although in these hours we notice a technical rebound in the dollar index.

The US dollar (USDX) has been weakened by the pessimistic expectations of the Fed. However, the latest speeches by the Fed representatives dispelled concerns about inflation and therefore point towards an accommodative monetary policy for a longer period. Meanwhile, investors and traders positioned themselves buying gold as a hedge against inflation and as a safe haven asset.

At the technical level, we note that XAU / USD (gold) is showing overbought levels, with a probability of an imminent technical correction in the next few hours, as it has reached the +1/8 murray zone, which represents strong resistance.

The eagle indicator is showing overbought signs as the moving line has reached the 95 area three times, confirming that the bullish force is running out. We do not rule out a last impulse in Gold. However, the most probable scenario is a further correction up to the 21 SMA located at $ 1,898 in the next few hours.

Meanwhile, any corrective pullback could find initial support at $ 1,898, the 21 SMA zone on the 1-hour charts, and lower at $ 1,883, the zone of the bullish channel support. Further down, strong support near the zone of $ 1,875 (8/8 murray) could halt the decline.

Our recommendation is to sell below +1/8 murray around 1906, or if XAU / USD breaks the 1-hour 21 SMA, at $ 1,898, with targets at $ 1,883 and $ 1,875.

Support and Resistance Levels for May 26 – 27, 2021

Resistance (3) 1,935

Resistance (2) 1,918

Resistance (1) 1,908

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Support (1) 1,900

Support (2) 1,890

Support (3) 1,880

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Trading tip for XAU/USD (gold) for May 26 - 27, 2021

Sell bellow 1,906 (+1/8 of murray) with take profit at 1,898 (SMA of 21 1-H) and 1,883 (trend line), stop loss above 1,911.