Gold is hovering above critical support. It stands at 1,729 level after escaping from a minor up channel. Technically, a new lower low may activate a sell-off in the short term. This scenario could take shape if the US Dollar resumes its appreciation versus its rivals.
The yellow metal could drop deeper if the US data come in line with expectations or better today. The risk-on sentiment may drive the gold price lower in the coming period. Gold registered an important rebound but this could be ended soon as the rate reached a strong upside obstacle.
XAU/USD May Drop!
Gold escaped from the minor up channel but the sell-off could be activated by a valid breakdown below the S1 (1,724) level. The price retests the inside sliding line (SL) of the major descending pitchfork which represents a strong dynamic resistance (support turned into resistance).
Technically, we need confirmation before going short on XAU/USD. We cannot exclude a temporary growth if the US data will disappoint later today. The rate may come higher to challenge the major descending pitchfork's median line (ML) before dropping deeper.
XAU/USD Outlook!
Dropping and closing under 1,719 activates a new leg lower, sell-off, with downside targets at 1,700 psychological level and at 1,676 lower low.
