Gold Analysis: XAU/USD recovery seems restricted to $ 1192

XAU/USD pair – Daily Chart

Gold prices in terms of US dollar (XAU/USD) dropped to fresh two week lows at 1185.34 levels as anticipated on Tuesday before recovering slightly to close the day at 1088.35. Gold prices accelerated losses below 50-DMA support placed at 1197.58 levels mainly on broad USD strength after durable goods orders, new home sales and consumer confidence from the US booked upbeat figures in the NA last session.

XAU/USD trades modestly flat today around 1188.30 levels, bouncing-off lows near two week highs at 1186.56 levels. The pair edged higher largely on a short-covering rally as traders booked profit on their USD longs after the recent upsurge. The pair continues to trade in a narrow range, consolidating previous losses ahead of a data-empty US calendar. The pair has formed a small doji on the daily charts indicating no clear direction set amid lack of fresh incentives. The daily RSI has also flattened around 43 supporting the directionless trading seen in XAU/USD.

Markets now await a host of macro data from the US to be released in the week ahead to confirm the latest signs of recovery seen in the US economy which may further boost the USD bulls, keep a lid on gold prices. Overall, a generalized intraday downside bias persists in XAU/USD as the US dollar is expected to resume its upward moves dragging the pair lower for a retest of 1185.34 (May 26 Low) levels and below that floors would open for a test of channel trend line support located at 1182.50 levels. The upside seems restricted to the 50-DMA support-turned resistance placed at 1198.

XAU/EUR pair – Daily Chart

Gold prices in terms of Euro (XAU/EUR) also met expectations and closed in red on Tuesday at 1091.60, having bounced-off lows at 1087.02 levels. The pair accelerated losses despite EUR/USD sell-off below 1.09 handle, largely on the back of a generalized US dollar strength following stronger than expected US macro data. However, the pair managed to rise above 100-DMA of 1090.40 at close.

At the moment, XAU/EUR trades lower circa 1089 levels, having faced rejection at 50-DMA resistance located at 1093.60 levels. The pair is seen struggling in a narrow range with the rising trend line posing as a major support at 1088. The pair is expected to remain pressured with limited upside as the US dollar may regain lost ground and drag XAU lower across the board later today. Also the pair may track USD moves amid lack of fresh incentives as no data is expected to be report on the EUR front. The daily RSI remains mildly lower at 52.60 suggesting that XAU bears are still in charge. To the downside, a break below the crucial trend line support at 1088 the pair could drop to 10-DMA support located at 1085.60. While to the upside, a break above the 50-DMA resistance will only back the case for further upside to 1096.17 (May 22 High) levels.

XAU/JPY pair – Daily Chart

Gold prices in terms of Japanese yen (XAU/JPY) faced rejection just ahead of 147k levels and rebounded sharply lower to end Tuesday at 146,153. The pair witnessed steep losses and dropped to lows at 145,844 levels after the release of impressive US data which spurred rate hike bets this year, weighing on all XAU pairs. However, the pair regained 146k barrier and remained within the pennant formation towards close.

XAU/JPY remained supported above the 146k barrier and extends gains, currently trading near highs around 146,350 levels. The pair edged higher today as the US dollar fell on correction after previous heavy gains which underpinned XAU bulls across the board. The daily RSI at 59 aims mildly higher, supporting the case for an extended recovery. To the upside the pair may retest daily highs at 146,473 and above that may test the pennant resistance located at 146,866 levels. To the downside, a break below 146k handle, the pair may retest previous lows at 145,844.

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