Gold Price Forecast: XAU/USD turns neutral as bulls fail to reclaim 200-day SMA
- Gold reversed its direction after rising above $1,830 on Wednesday.
- Renewed USD strength is not allowing XAU/USD to gain traction.
- Gold's key technical levels remain intact despite sharp fluctuations.
After moving up and down in a relatively narrow range above $1,800 and closing flat on Monday and Tuesday, the XAU/USD pair gained traction and jumped to a daily high above $1,830. However, the renewed USD strength forced the pair to reverse its direction during the American trading hours. As of writing, gold was virtually unchanged on the day at $1,810.
Earlier in the day, the data published by the Automatic Data Processing (ADP) Research showed that private sector employment in the US rose by 330,000 in July. With this print falling short of the market expectation for an increase of 695,000, the USD came under selling pressure. Reflecting the broad-based USD weakness, the US Dollar Index (DXY) dropped to a daily low of 91.90.
Other data from the US revealed that the business activity in the service sector expanded at an unprecedented pace in July. The ISM Services PMI climbed to a new series-high of 64.1 from 60.1 in June. This reading beat analysts' estimate of 60.4 and helped the USD limit its losses.
More importantly, hawkish comments from Fed Vice Chair Richard Clarida provided a strong boost to the greenback and weighed heavily on XAU/USD.
While speaking at an online event hosted by the Peterson Institute for International Economics, Clarida noted that he would support announcing a moderating in the Fed's asset purchases later this year. Regarding the rate outlook, Clarida said that he is expecting conditions for raising rates to be met by the end of 2022.
Following these comments, the DXY shot higher and touched a new weekly high of 92.30. As of writing, the index was up 0.2% at 92.25.
On Thursday, Goods Trade Balance and Initial Jobless Claims reports will be featured in the US economic docket. However, the market reaction to these data is likely to remain short-lived ahead of Friday's Nonfarm Payrolls (NFP) report.
Gold technical outlook
Despite the sharp fluctuations witnessed on Wednesday, gold's near-term technical outlook remains neutral with a slight bearish bias given the fact that buyers failed to hold the price above the 200-day SMA. Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart continues to move sideways near 50, confirming the pair's indecisiveness.
On the upside, the 200-day SMA continues to act as dynamic resistance around $1,820. In case gold manages to make a daily close above that level, the next hurdle could be seen at $1,830 (Fibonacci 38.2% retracement of the April-June uptrend) ahead of $1,835 (July 15 high).
$1,810 (20-day SMA) aligns as interim support before the critical $1,800 level, where the 100-day SMA and the Fibonacci 50% retracement meets, and $1,790 (July 23 low, static level).
Additional levels to watch for