XAU/USD remains vulnerable, break below 200-DMA in play

Gold struggled to gain any traction and remained depressed near multi-month lows.
Bearish flag breakdown supports prospects for an extension of the recent downtrend.
Any meaningful recovery attempt might be seen as an opportunity for bearish traders.
Gold has dropped sharply below $1,800, breaking below the 200-DMA

Update: XAU/USD tumbled down to a fresh low of $1,774 at the time of writing, amid cascading stops, breaking below the 200-DMA. See:

Gold traded with a mild negative bias through the mid-European session and was last seen hovering near the lower end of its daily range, around the $1805 region.

The XAU/USD now seems to have found acceptance below a three-day-old ascending trend-channel, which constituted the formation of a bearish flag on short-term charts. Bearish technical indicators on hourly/daily charts add credence to the negative set-up and support prospects for an extension of the recent downward trajectory.

That said, bearish traders might still wait for some follow-through selling below the very important 200-day SMA, around the $1800 mark, before placing fresh bets. The XAU/USD might then accelerate the downward trajectory towards the $1763 region – support marked by the 50% Fibonacci level of the $1451-$2075 strong move up.

On the flip side, any meaningful recovery attempt might be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $1818-20 region. This is closely followed by the trend-channel resistance, around the $1822 level, which if cleared decisively might trigger some near-term short-covering move.

Some follow-through buying has the potential to lift the commodity further towards the 38.2% Fibo. level resistance near the $1835 region, which should cap any further upside.