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Gold is trading at the $1,829 level after the last sell-off started yesterday. The price has found temporary support but the bias is bearish as the selling pressure is high. Technically, the new lower low registered today indicates that the downside should continue.
USD's aggressive appreciation after better than expected US manufacturing and services data have punished the yellow metal. The Flash Manufacturing PMI increased unexpectedly from 53.4 to 56.7 points, beating the 52.5 estimates, while the Flash Services PMI increased from 56.8 to 57.7 points, even if the specialists have expected to drop to 55.8.
The US is to release the CB Consumer Confidence today, this fundamental report could bring some volatility on gold as well. Gold goes down as the risk-on sentiment dominates the markets due to the COVID-19 vaccine talks.
XAU/USD has finally managed to break through the $1,848 static support, a critical obstacle, so the outlook has turned into a bearish one. I've told you in the last weeks that the gold price could develop a broader downside movement, corrective phase if it closes under the $1,848.
You can notice that gold has escaped from the ascending pitchfork's body signaling a downside movement, sell-off. Gold has reached a first downside target represented by the lower median line (lml).
The fact that the price has touched the lower median line (lml) announced a potential downside breakout.
Yesterday's breakdown below the $1,848 static support, lower low, validates a further drop. The upside, uptrend, was safe as long as the price was traded above the $1,862 - $1,848 area, so now, the corrective phase was activated.
Gold is expected to drop after a temporary rebound, $1,848 retest, or without any bounce back. A valid breakdown below the lower median line (lml) signals a drop at least till the $1,800 psychological level.
A major drop will be confirmed by a bearish closure below the $1,800 level, the next downside target is seen at the $1,744 level.
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