Gold Price Forecast: XAU/USD set for more pain if key $1,805-$1,800 support zone fails

Gold price is looking to extend the downtrend into the third straight day this Wednesday, as bears seem to gather strength for the next push lower. The United States Dollar (USD) is seeing an additional leg to the upside, sitting at the highest level in three months when compared to its main rivals.  

Hawkish Federal Reserve Chair Powell revives the US Dollar recovery

Federal Reserve Chair Jerome Powell testified on the semi-annual monetary policy report on Tuesday before the Senate Banking Committee and triggered a much-awaited rally in the US Dollar across the board, which knocked down the Gold price to its weakest level in five trading days at $1,813. The US Treasury bond yields spiked to fresh multi-month highs, with the benchmark 10-year US Treasury bond yields recapturing the closely watched 4.0% level. Wall Street indices tumbled roughly 1.50% on the day, as a wave of risk aversion spread through the financial markets.

Federal Reserve Chief Powell said during his testimony that if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.” He added that the "ultimate level of interest rates" is likely to be higher than previously anticipated as well. These were the words from Powell that the US Dollar bulls were yearning to hear, in order to ramp up expectations for a 50 basis points (bps) rate hike on March 22. Meanwhile, markets began repricing a peak rate of about 6% this year on the hawkish commentary.

In Wednesday’s trading so far, Asian markets remain on the back foot amid the hawkish surprise from Fed Chair Powell, seeking safety in the US Dollar. Therefore, the non-interest-bearing Gold price remains at further downside risks. The 10-year US Treasury bond yields are up 0.85% on the day, trading back near 4.10% after retreating sharply to 3.927 into Tuesday’s closing.

United States ADP jobs data in focus ahead of Nonfarm Payrolls

Day 1 of Federal Reserve Chairman Jerome Powell’s testimony was critical for the Gold market but his hearings before the House Financial Services Committee on Wednesday will be closely eyed for any fresh spark on the policy outlook.

However, Gold traders will eagerly await the ADP private sector Nonfarm Employment Change data from the United States, a precursor to the all-important Friday’s Nonfarm Payrolls data. The ADP jobs report is likely to see a growth of 200K jobs in February, compared with an increase of 106K previously. Meanwhile, the US Nonfarm Payrolls on Friday will show job additions to the tune of 200K last month as against an outstanding growth of 517K reported in January. A strong US jobs figure is critical to cementing the 50 bps March Fed rate hike.

Apart from the US ADP payrolls data, Gold price will also take cues from the JOLTS Job Openings data, which could once again indicate tighter labor market condtiions in the United States, eventually affecting the US Dollar valuations.

Gold price technical analysis: Daily chart

On Tuesday, Gold price broke through several critical support levels, thanks to Fed Chair Jerome Powell’s hawkishness.

Gold bears succeeded in yielding a daily closing below the bearish 21-Daily Moving Average (DMA), then at $1,844.

Further, the strong static support at $1,830 also got eroded, as a result of a sharp sell-off in the Gold price.

Amidst the ongoing downtrend, Gold price remains poised to challenge the critical support at $1,805, where the bullish 100 DMA and the February 28 low coincide.

On the upside, the Gold price conitnued to run into stiff resistance at the $1,860 static resistance.

Should the downside gather steam, a sustained break below the abovementioned support at $1,805 will confirm a parallel channel breakdown.

The next bearish target for Gold price is now envisioned at the flattish 200 DMA at $1,775. Ahead of that the $1,800 round level and $1,790 could test the bullish commitments.

The 14-day Relative Strength Index (RSI) is holding comfortably below the 50.00 level, supporting the bearish bias.

Altenatively, any recovery attempts will need acceptance above the strong support-turned-resistance at $1,830, above which the bearish 21 DMA, now at $1,838, will come into the picture.