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Gold Price Forecast: XAU/USD drops to one-month lows ahead of US data

XAU/USD : Four-hour chart

Gold continued losing ground through the mid-European session and dropped to one-month lows, around the $1,773-72 region in the last hour. The US dollar was back in demand amid expectations for an imminent Fed taper announcement and a modest pickup in the US Treasury bond yields. This, in turn, was seen as a key factor that weighed on the XAU/USD for the second successive day.

Meanwhile, the latest leg of a sudden fall over the past hour or so could be attributed to some technical selling below the $1,780 horizontal support, or monthly lows touched on Tuesday. Given the recent pullback from the $1,832-34 supply zone, the overnight rejection near a technically significant 200-day SMA and the subsequent decline supports prospects for additional losses.

Next on tap will be the US economic docket, highlighting the release of Retail Sales, Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to gold. 

Previous update: Gold extended the previous day’s rejection slide from the very important 200-day SMA and witnessed some follow-through selling for the second successive session on Thursday. The downward trajectory dragged the XAU/USD back closer to monthly swing lows, around the $1,780 region, touched earlier this week. Despite signs of easing inflationary pressures in the US, investors still believe that the Fed would begin rolling back its massive pandemic-era stimulus later this year. This, in turn, was seen as a key factor driving flows away from the non-yielding yellow metal.

Meanwhile, worries about the fast-spreading Delta variant and a global economic slowdown did little to lend any support to the safe-haven XAU/USD. Bulls even shrugged off a subdued US dollar price action, which tends to benefit dollar-denominated commodities, including gold. With the latest leg down, the precious metal has now erased its weekly gains and seems vulnerable to slide further. A convincing break below the $1,780 horizontal support will reaffirm the negative outlook and set the stage for the resumption of the recent decline from the $1,832-34 supply zone.

Previous update: Gold (XAU/USD) takes offers around $1,792.50, extending the previous day’s losses heading into Thursday’s European session.

The yellow metal failed to benefit from the US dollar weakness on Wednesday as market sentiment dwindles over the Fed’s next moves even as the US Consumer Price Index (CPI) favored equities and weighed on the US Treasury yields.

The reason could be linked to the cautious optimism shown by the European Central Bank (ECB) policymakers and strong NY Empire State Manufacturing, as well as Import-Export Price Index data for September and August respectively.

Among the ECB policymakers, Executive Board Member Isabel Schnabel was more hawkish while saying, “Market may be overestimating risks to the global growth outlook.” On the same line was ECB Chief Economist Philip Lane who said that he is happy that the accommodative monetary policy is helping to build core inflation in the euro area, as reported by Reuters.

It’s worth noting that Australia’s trilateral security pact with the UK and the US, availing nuclear-powered submarines, signals a further worsening of relations with China and weighed on market sentiment earlier in the day. Further, higher virus infections in Australia, China and New Zealand also challenge the risk appetite, as well as gold prices.

It should be noted that the US adds the UK to its welcome list for the next week’s diplomatic talks in the White House and amplifies market fears that the Western friends are again gearing up for a battle with China, which in turn heavy the sentiment.

Amid these plays, S&P 500 Futures erase early Asian gains while the US 10-year Treasury yields drop one basis point (bp) to retest 1.297% by the press time.

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USD/JPY drops below 110.00 on renewed USD weakness

USD struggles to find demand after inflation report

After spending the first half of the day moving sideways above 110.00, the USD/JPY pair lost its traction in the early American session and was last seen losing 0.1% on the day at 109.88.

The renewed selling pressure surrounding the greenback seems to be the primary driver of USD/JPY weakness. After the data published by the US Bureau of Labor Statistics revealed that the annual Core Consumer Price Index (CPI) declined to 4% in August from 4.3% in July, the US Dollar Index (DXY) turned south. As of writing, the DXY was down 0.3% at 92.33.

Furthermore, the benchmark 10-year US Treasury bond yield, which gained as much as 1% earlier in the day, is now losing 0.7%, putting additional weight on USD/JPY’s shoulders.In the meantime, US stock index futures started to push higher following the US inflation data, suggesting that Wall Street’s main indexes are likely to open in the positive territory. In case risk flows start to dominate the financial markets, the USD could find it difficult to stage a rebound and cause USD/JPY to end the day in the negative territory.

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RISK WARNING : Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. Please read our legal documents and ensure that you fully understand the risks before you make any trading decisions.
GENERAL ADVICE WARNING : The information in this website is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on the advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, and after considering the legal documents.
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EUR/USD bulls holding the fort at the 61.8% ratio

EUR/USD holds in positive territory into the closing bell on Wall Street.

EUR/USD is struggling to extend gains made in Thursday’s North American session, capped at a high of 1.1841 and trading mid-range near 1.1830. 

The euro is holding onto small daily gains following the European Central Bank meeting whereby it said it will trim emergency bond purchases over the coming quarter.

This is seen as the central banks first small step towards unwinding the emergency aid as the nation’s inflation readings head towards their highest in nearly a decade.

“The ECB is delivering mainly as expected today,” analysts at TD Securities said in a report on Thursday. “Looking ahead, the focus will be on how the ECB defines “moderately” – anything less than €60bn/mo could be bearish.”

Meanwhile, the ECB’s governor, Christine Lagarde, came with an upbeat assessment of the nation’s economic progress.

She explained that there has been a strong recovery in employment, business investment and said that there is ample scope for private consumption to rise further.

The central bank has raised its growth and inflation forecasts for this year although the 2023 forecasts provide a better assessment of where the ECB expects the economy to be over its forecast horizon.

”That is what is critical for monetary policy,” analysts at ANZ Bank argued.

The ECB left, however, its 2023 Gross Domestic Product projection unchanged at 2.1% and inflation was tweaked to 1.5% vs 1.4%, well below the 2.0% target.

”That predicted path implies the ECB will withdraw stimulus very cautiously and that interest rate rises remain a long way off. The focus in coming months will be on how to address the anticipated ending of PEPP next March (a temporary, pandemic facility). To end it abruptly risks a sudden tightening in monetary conditions that could undermine growth and inflation expectations,” the analysts explained.

”We, therefore, expect some expansion of the APP programme (currently EUR20bn per month) and/or a new envelope of QE purchases. The ECB will announce more in December.”

Meanwhile, investors are also focused on when the US Federal Reserve is likely to begin paring bond purchases.

The US dollar has managed to find demand on the notion that the global economy is no better off than the US’s recovery and despite last week’s dismal jobs print, the nation remains on solid foundations. 

The Fed. however, is unlikely to make a move until at least later after the weaker than expected jobs report on Friday.

That being said, we had four Fed officials on Wednesday saying that the central bank needs to make a move, though some cautioned a final decision requires more data.

As for Us data on Thursday, it has shown that the number of Americans filing new claims for jobless benefits continues to fall.

Last week, the claims fell to the lowest level in nearly 18 months, offering more evidence that job growth was being hindered by labour shortages rather than cooling demand for workers.

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RISK WARNING : Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. Please read our legal documents and ensure that you fully understand the risks before you make any trading decisions.
GENERAL ADVICE WARNING : The information in this website is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on the advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, and after considering the legal documents.
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XAU/USD could extend correction with a daily close below $1,820

XAU/USD : Daily chart

Gold spent the majority of the previous week moving sideways in a tight range above $1,800 but managed to gain traction following the disappointing August jobs report from the US on Friday. After posting its highest weekly close since late July at $1,827, however, the XAU/USD pair reversed its direction on Monday and was last seen losing 0.3% on a daily basis at $1,822.

In the absence of significant fundamental drivers, gold’s action seems to be a technical correction of last Friday’s upsurge. Additionally, trading conditions remain thin due to the Labor Day holiday in the US, confirming the view that gold is staying in a consolidation phase rather than moving into a downtrend.

On Tuesday, there won’t be any high-tier macroeconomic data releases from the US and the risk perception could impact the greenback’s valuation and XAU/USD’s movements.

The data published by the US Bureau of Labor Statistics revealed on Friday that Nonfarm Payrolls (NFP) rose by 235,000 in August. This print missed the market expectation of 750,000 by a wide margin and the S&P 500 Index closed the day flat. In case Wall Street’s main indexes turn south following the long weekend, the greenback could find demand as a safe haven and force XAU/USD to remain on the back foot.

On the other hand, the dismal NFP reading is also seen as a factor that could allow the Federal Reserve to delay asset tapering. A dovish policy outlook is likely to limit the USD’s gains in the near term.

 

Gold technical outlook

On the downside, the initial support is located at $1,820 (Fibonacci 38.2% retracement of April-June uptrend). With a daily close below that level, gold could extend its slide toward $1,810 (200-day SMA). In case this level turns into resistance, the next target is located at $1,800 (psychological level).

Resistances could be seen at $1,830 (static level), $1,845 (static level) and $1,855 (Fibonacci 23.6% retracement).

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RISK WARNING : Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. Please read our legal documents and ensure that you fully understand the risks before you make any trading decisions.
GENERAL ADVICE WARNING : The information in this website is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on the advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, and after considering the legal documents.
REGIONAL RESTRICTIONS : We do not offer our services to residents of certain jurisdictions such as North Korea, Canada, United States and some other regions.
FINTECH GLOBAL GROUP OF COMPANIES IS AUTHORIZED IN VARIOUS JURISDICTIONS :
Fintech Global LLC trading under FTG, is authorised by SAINT VINCENT and THE GRENADINES number 588 LLC 2020. / Fintech Global Limited trading under FTG, is authorised by HONG KONG number 2979659.

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