- The price of gold dipped below the critical support at $1,836.00 firmly.
- Investors shone the spotlight on Fed Powell’s testimony.
- Market participants should prepare for an underperformance in the US PMI.
The price of gold (XAU/USD) took a steep dip after failing to hold above the critical hurdle of $1,840.00 at the start of the European session. The precious metal is hovering around the $1,835.00 cushion and an extension of a bearish move seems possible as uncertainty surrounding testimony from Federal Reserve (Fed) Chairman Jerome Powell cannot be ruled out.
The US Dollar Index (DXY) posted a modest rebound after retesting Monday’s low at 104.23. A sideways move is expected from the DXY as investors await Fed testimony to make informed decisions. Along with Fed testimony, the US Purchasing Managers’ Index (PMI) will remain in focus, which is expected on Thursday.
The composite PMI is slightly higher at 53.5 from the previous print of 53.4. While the manufacturing and services PMIs show a strong underperformance. The Services PMI is significantly lower at 49.1 from the previous print of 53.2. Additionally, the manufacturing PMI is expected to decline to 54.7 from the previous reading of 55.7.
Gold technical analysis
Gold prices gave a break on the downside of the descending triangle with horizontal support placed from $1,836.04 while the descending trendline is drawn from Monday’s high at 1,845, $54. The main trendline set from last week’s high at $1,857.58 acted as a major barricade for gold bulls.
Gold bulls saw a sharp drop after failing to defend the 50-period exponential moving average (EMA) at $1,838.26. Meanwhile, the Relative Strength Index (RSI) slipped into the downside range of 20.00 to 40.00, signaling more downside to come.