Gold Price Forecast: Technical setup favors XAU/USD bears, focus on US data

Gold price experienced a rollercoaster ride yet another day on Wednesday, mainly driven by the sentiment around the US dollar and Fed’s next monetary policy action. Gold price broke its range play and spiked to daily highs of $1795 after downbeat US Markit Services PMI and New Home Sales data eased inflation concerns and weighed heavily on the US dollar. However, the dollar staged a rebound and smashed gold after the rate hike chatters resurfaced on comments from the Fed policymakers Raphael Bostic and Robert Kaplan. Bostic said, “Given the upside surprises and recent data points, I’ve pulled forward my projection for our first move to late 2022.” Meanwhile, Kaplan noted he sees the See's rate hike in 2022. Additionally, progress on the US infrastructure spending bill also added to the dollar’s strength, although failed to have any positive impact on Wall Street indices.

Heading into a fresh batch of significant US economic releases on Thursday, gold price is holding the lower ground, as the greenback preserves the recent recovery gains while benefiting from a fresh leg up in the US Treasury yields. A deal reached on a "framework" for an infrastructure spending bill underpins the dollar alongside yields. Concerns over rising cases of the Delta covid strain globally temper the market mood, keeping the buoyant tone intact around the safe-haven dollar. Investors await the US Durable Goods, Final GDP and weekly Jobless Claims for fresh hints on the economic recovery and future monetary policy path. Further, a slew of speeches from the Fed official will also keep the gold traders on their toes.

Gold Price Chart - Technical outlook

Gold: Daily chart

As observed on gold’s daily chart, the last week’s sell-off followed by the downside consolidation so far this week has carved out a bear pennant formation.

A daily closing below the rising trendline support at $1768 will validate a downside breakout of the bearish continuation pattern.

Thereafter, the Immediate line of defense awaits at the two-month lows of $1761, below which the $1750 psychological barrier will come into play.

Further south, mid-April lows around $1725 could offer temporary reprieve to gold bulls.

The Relative Strength Index (RSI) edges lower towards the oversold territory, currently at 32.71, suggesting that there is more room to the downside.

Adding credence to additional weakness, gold price is on the verge of confirming a death cross formation, with the 200-Daily Moving Average (DMA) looking to cut the 50-DMA from above.

On the flip side, if the buyers manage to find a strong foothold above $1794, the confluence of the 100-DMA and falling trendline support, it will lead to a pattern failure.  

The June 18 highs of $1797 will be next on the bulls’ radars before they look to retest $1800.