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XAU/USD dropped after failing to stabilize above the 1,853 key level. Now, it was trading at 1,845 at the time of writing. Technically, the price action signaled that the buyers are exhausted and that the bears could take the lead again. Still, a strong sell-off needs confirmation.
Fundamentally, gold seems strongly bearish after the ECB announced a 25 bps hike in July. As you already know, the Main Refinancing Rate was left unchanged at 0.00% at the June meeting. XAU/USD plunged as the US dollar index rallied in the short term. Don't forget that the US is to release its inflation figures tomorrow. The CPI and the Core CPI are seen as market-driving events that could bring sharp movements in gold as well.
Gold found resistance above the 1,853 level. It declined below the uptrend line. A breakout through this dynamic support could open the door for a larger drop.
Technically, staying on the uptrend line signaled an imminent breakout. After its sell-off, the XAU/USD pair could test the uptrend line before resuming its decline.
The current aggressive breakout could give a selling opportunity. iI's risky to go short as the price could test the broken uptrend line or invalidate the breakout.
A new low below the 1,837 could lead to a downward movement. This scenario could bring new short opportunities.
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