On Thursday, gold was trading in different directions, but on the whole, it moved in a narrow range, which was formed at the beginning of the trading week.
Analyzing the events that took place yesterday, special attention should be paid to the reaction of gold to the growth of the dollar. Unlike previous trading days, yesterday the yellow metal was able to withstand the new onslaught of the dollar, with USD index ended the day with growth of more than 0.5%, while the precious metal finished trading with minimal deviations from the opening price. The reason for such reaction lies in the investor’s mood that prevailed yesterday in the stock markets. Investors' appetite for risk has sharply declined, after the ECB amended its monetary policy parameters, lowered its forecasts for the pace of development of the European and world economy and postponed the possible timing of the rate hike to the beginning of 2020. Major European indices finished trading lower in the range from -0.4% to - 0.7%. Following this decline, the bearish rally continued in US indices. Here the decline was even stronger, Dow Jones -0.78%, S & P 500 -0.8%, NASDAQ Composite -1.13%. These movements contributed to a significant increase in demand for traditional defensive assets such as gold and yen.
Today, the mood on the stock markets has deteriorated even more after China published another batch of weak statistics. In February, compared to the same period last year, exports declined by 20.7% (!!!), and imports by 5.2%. The trade surplus was $ 4.12 billion, with a forecast of $ 24.45 billion. These data provoked another wave of sales in stock markets and further increased the demand for defensive assets. From the beginning of the trading day, the Japanese yen strengthened by 0.5% against the dollar, gold shows an increase of 0.35%.
Today, the focus of investors will be on the data regarding the US labor market. The focus here will traditionally remain on three main indicators: the unemployment rate, the number of newly created jobs and the growth of wages. If these indicators will be weaker than expected, gold can restore most of the positions that were lost last week and at the beginning of the current trading week.
On the chart, trading is still in the range of 1284.00-1291.00, which was indicated by the market during the previous trading days. At the same time, yesterday we received a strong enough signal that the price could leave this consolidation upwards. The lower limit of the range was falsely pierced down, after which bullish waves followed, within which we now see an increase in upward pressure on the level of 1291.00.
Resistance Levels: 1291.00, 1299.00, 1310.00;
Support levels: 1284.00, 1280.00, 1275.00.
The main scenario is a breakdown of resistance at 1291.00 and an increase to 1299.00 and, possibly, to 1310.00.
The alternative scenario is a false breakdown of resistance 1291.00 and the further development of the the range of 1284.00-1291.00.
The news background for gold has improved significantly over the past 24 hours. The graph also has the prerequisites for the formation of a reversal. Therefore, today we give preference to longs that should be looked for in the range of 1284.00-1286.00.
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