Gold Price Forecast: XAU/USD's fate is in the hands of the US dollar bulls and NFP

• Gold prices are back in the hands of the US dollar ahead of NFP.
• A break of daily support at $1,850 opens the door to a test of $1,800 should US dollar strength prevail. 

At $1,875, the gold price has been pressured and is trading not far from the lows of the day down at $1,872.54, losing some 0.34% at the time of writing. Gold fell from a high of $1,909.82 as the US dollar rebounded on Thursday, moving in on the 20-year highs reached last week, as per the DXY index. 

DXY, an index that measures the greenback vs. six rivals, is currently trading at 103.84 and is 1.3% higher on the day after rallying from a low of 102.352 to a new cycle high of 103.942. The move comes following the Federal Reserve the prior day affirming that it would take aggressive steps to combat soaring inflation. Markets initially sold the fact yesterday but the dollar dropped sharply when the Fed chairman, Jerome Powell, dialled back on prospects of 75bps hikes. 

However, the traders have now sold the euro which has propelled the greenback higher again. Weak German data showing that industrial orders in March suffered their biggest monthly drop since last October and the Ukraine crisis tensions are weighing on risk sentiment in the eurozone. The greenback was subsequently boosted by safe-haven buying as global equities come back under pressure. 

All eyes on NFP

The moves in the markets come ahead of Friday's showdown event in the US jobs market. The Nonfarm Payrolls (NFP) is a major risk and could well set the tone for the following weeks ahead of the next Fed rate decision. 

''A strong payrolls report could perversely push the market to price in more tightening as the Fed reduced its optionality at its most recent meeting,'' analysts at TD Securities said. 

''That leaves a resilient USD vs EUR and yen very much the path of least resistance. A softer wages print should help to temporarily take the edge off but this will be short-lived until evidence of a peak/moderation in CPI emerges.''

Should the jobs data come in strong, it could exacerbate the fall in gold prices, especially considering that the breadth of traders' short positions remains near their lowest levels on record. Shorts that have been squeezed between $1,890 and $1,910 in this week's rally in the gold price will likely be looking to reinvest any dry powder on further signs that the US dollar bulls are moving in again. 

Gold technical analysis

The price is carving out a case for a significant downside continuation with the resistance near $1,890 holding up for the most part bar a clearing in the short-lived spike to $1,910. A break of daily support at $1,850 opens the door to a test of $1,800 should US dollar strength prevail.