Gold plunged in the short term after reaching a resistance area. It's located at the 1,767 level far below 1,800.64 yesterday's high. The rate dropped by 1.99% from yesterday's high to 1,764.86 today's low.
XAU/USD dropped because the Dollar Index continues to stay high. Actually, DXY tries to rebound after registering a massive drop. Still, you should know that gold is still above a strong support level. This could still be only a temporary decline.
After better-than-expected US retail sales data, gold's drop is natural. DXY's rally could force XAU/USD sellers to drag the yellow metal down.
XAU/USD turned to the downside
Gold plunged after reaching the weekly R2 (1,796.94) and the channel's upside line. Now it stands right above the Ascending Pitchfork's lower median line (lml) which stands as a dynamic support.
A bullish pattern printed on the lower median line (lml) could signal new bullish momentum. 1,761.50 weekly pivot is seen as strong static support. Technically, after such a massive drop, the bulls may step in and push the rate higher again.
XAU/USD outlook
A false break with great separation or a major bullish engulfing here on the lower median line (lml) could announce a new leg higher. It could still jump higher as long as it stays within the Ascending Pitchfork's body, within the up-channel between the lower median line and the inside sliding line. Technically, after such a strong sell-off, XAU/USD could try to rebound.
Making a valid break below the lower median line (lml) may signal a deeper drop.
The material has been provided by InstaForex Company - www.instaforex.com