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Gold is declining due to strengthening USD

On Thursday, gold is trading at a 0.5% decline amid a USD recovery. Gold becomes more expensive for foreign investors.

 

In the first half of the week, the American dollar was under pressure and three days in a row completed trading in the red zone. Today the market situation is changing. Demand for the US currency is growing again amid worsening relations between the US and China. Traditionally, investors see the dollar as the main defensive asset against the growth of geopolitical risks associated with tensions between official Beijing and Washington.

 

On Wednesday, the US Senate approved a bill that could force Chinese companies to refuse to register on US stock exchanges. Under the new law, companies that place their shares on US exchanges are required to undergo an audit control. Prior to this, Chinese companies refused to submit their economic reports for inspection to American regulators.

 

The Washington Post also announced the preparation of a 20-page document criticizing China. Thus, the White House wants to shift all responsibility for the difficult epidemiological situation in the USA to China. Trump hopes that these actions will help him enlist the support of the majority of voters in the election race.

 

Today we are expecting a fairly busy economic calendar. In Europe, investors will follow the preliminary PMI May data for the manufacturing and services sectors. Regarding the US, we recommend to pay attention to the weekly report on applications for unemployment benefits, the publication of a report from the Philadelphia FRB, preliminary data on the manufacturing and service sector PMI for May, and a speech by FRS Chairman Jerome Powell.

 

The bulls could not develop an upward movement. At the level of 1750.00, the price met quite strong resistance. Today we expect the development of a downward movement in the direction of the level of 1729.00 and below.

 

Resistance Levels: 1750.00, 1765.00, 1780.00;

 

Support Levels: 1729.00, 1715.00, 1695.00.

 

The main scenario - a correction towards 1750.00 and a decline to 1729.00.

 

An alternative scenario - a consolidation above the level of 1750.00 and growth to 1765.00.

 

The current fundamental outlook is moderately negative. We consider shorts from the level of 1750.00.

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