Early in the European session, gold (XAU/USD) is trading at around 1,722 with a bullish bias but showing overbought levels.

The price of gold has reached a new high so far this week around 1,729. Traders are eyeing the strong resistance at 1.735. The yellow metal rallied from a low of 1,695 (200 EMA), supported by weak US yields reaching new lows.

According to the 4-hour chart, XAU/USD has turned bullish after breaking a critical level of the 200 EMA (1,696) and after consolidating above the psychological level of 1,700.

As long as gold consolidates above the 200 EMA located at 1,696, the outlook will remain positive and the metal is likely to extend its advance above the resistance of 1,635 and could reach 8/8 Murray around 1,750.

The 4-hour chart shows that the asset is overbought. The eagle indicator has reached the 95-point level which signals an imminent technical correction for the next few hours. The key level is the 200 EMA which is acting as intraday support around 1,696 - 1,700.

As gold has strong resistance at 1,735, we reckon a technical correction below this level towards the 200 EMA located at 1,696.

A strong technical bounce is expected around this area and it will be a clear signal to buy with targets at 1,718 (7/8 Murray) and 1,750 (8/8 Murray).