Gold trades at 1,710 at the time of writing and it seems very heavy in the short term after failing to approach and retest the near-term resistance levels. The sell-off has intensified after the US has released the ADP Non-Farm Employment Change indicator which was reported at 117K in February lower versus 203K expected. The sell-off was caused by the revised indicator for January when the US has added 195K jobs.
The US is to release also the ISM Services PMI and the Final Services PMI. Both economic indicators are expected to remain steady. Better than expected data could boost the USD and could push gold lower.
As you can see on the H4 chart, XAU/USD is almost to reach the major channel’s downside line again after failing to come back higher towards the Pivot Point (1,755) in its last attempt.
The aggressive breakdown through the Falling Wedge’s support and below the 50% Fibonacci line confirmed a further drop at least until the downside line. The price has reached the downside line but we don’t have yet any signal that Gold could develop a bullish reversal.
Actually, the selling pressure is high, XAU/USD could fall below the downside line and under 1,700 if the USDX jumps higher in the coming hours. The S1 (1,695) and the 61.8% retracement level are seen as immediate downside targets.
Gold is traded right above a critical support area, any reversal pattern or false breakdown with great separation could signal that the downside movement is over and that XAU/USD will develop another leg higher.
On the other hand, dropping and stabilizing below the downside line and under 61.8% retracement level signals a larger corrective phase, decline, in the short to medium term on gold.
The risk-on sentiment caused a new sell-off on gold which is is traded near a strong support area. XAU/USD could fall way below 1,700 psychological level if the US Dollar Index resumes its upside movement.