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  • XAU/USD came under strong bearish pressure in early American session.
  • Gold could continue to weaken against USD with a daily close below $1,850.

The XAU/USD pair fell sharply in the last minutes and touched its lowest level since mid-July near $1,838. As of writing, the pair was trading around $1,840, losing 1.64% on a daily basis.

The renewed USD strength and the risk-on market environment seems to be hurting gold. The data published by the IHS Markit revealed on Monday that the private sector’s business activity in the US expanded at an impressive pace in November. The Manufacturing PMI and the Services PMI rose to 56.7 and 57.7, respectively, and both readings beat analysts’ estimate by a wide margin.

With the initial market reaction, the US Dollar Index (DXY), which stayed depressed around 92 for the majority of the day, rose sharply and erased the majority of its daily losses. As of writing, the DXY was down only 0.05% on the day at 92.30.

Meanwhile, reflecting the upbeat market mood, Wall Street’s main indexes continued to push higher. At the moment, the Dow Jones Industrial Average and the S&P 500 are both up nearly 1% on the day.

Gold technical outlook

With this latest drop, the XAU/USD pair broke below the key support that’s located around $1,850 (Fibonacci 61.8% retracement of the June-August rally). A daily close below that level could cause the pair to push lower toward $1,800 (psychological level/200-day SMA). Additionally, the Relative Strength Index on the daily chart is edging lower toward 40, confirming the near-term bearish outlook.

On the upside, $1,850 area now acts as the initial resistance ahead of $1,876 (daily high).

XAU/USD daily chart



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