Similar to EUR/USD and USD/JPY last week, it looked like gold was facing a technical break lower as price fell through the support region of $1,975-81. However, with the dollar getting checked back on Friday and in trading today, we are seeing price action consolidate a little as traders call into question the breakout move from last week.

The US debt ceiling talks seem to be the main focus in markets at the moment and that is arguably keeping dollar gains in check. Now, gold is trading back towards the broken support region of $1,975-81 and so buyers are not quite throwing in the towel just yet.

However, looking at the near-term chart:

It is proving to be a similar case for gold as it is in EUR/USD here. The minor bounce today ran into a test of its 100-hour moving average (red line) and that key level is holding for now. In technical terms, sellers are still in near-term control as such. And it would require buyers to break above that to open up some room to work with between that and the $2,000 mark again.

So, while the downside break is being questioned right now, sellers are still hanging on in there as they hold at the key near-term level pointed out above – now seen at $1,980.38 roughly. Keep below that and the near-term bias remains more bearish but break above and the bias will turn more neutral instead.

But as we can see with other dollar pairs right now, the technical picture is more or less the same. This suggests that dollar sentiment is the key driver of trading conditions currently so it is best to keep the focus on factors impacting that i.e. debt talks, Fedspeak, US economic data.

This article was written by Justin Low at www.forexlive.com.