Gold Analysis: XAU/USD could drop to 10-DMA at 1185

XAU/USD pair – Daily Chart

Gold prices in terms of US dollar (XAU/USD) failed to sustain above 1200 mark and ended the week lower on Friday at 1198.53 levels, moving away from fresh three week high reached during the last week. The pair broke the channel on the downside, making a low of 1192.56, although bounced-off lows and closed above the channel support on weekly basis. XAU/USD edged lower on Friday largely on the back of broad based US dollar strength after the US GDP remained unchanged and the consumer sentiment figures came above estimates which boosted the US dollar.

The pair, currently trades around 1194 levels having displayed a clear channel break down on daily charts. The pair has formed a bearish flag pattern as seen on intraday chart and with the break down, the pair is likely to fall further to 10-DMA located at 1185 levels with a break below the daily lows of 1192.20 levels. The daily RSI at 51.19 has inched lower clearly pointing to the continuation of the downtrend. The upside seems limited as the pair faces stiff resistance at 1200 levels and beyond that at trend line resistance placed at 1202.18 levels. Overall, the pair is likely to extend losses as the US dollar is expected to remain firmer on the back of Yellen’s comments and ahead of a series of US economic releases due later in the day.

XAU/EUR pair – Daily Chart

Gold prices in terms of Euro (XAU/EUR) settled the week on a positive note advancing to fresh 7-week highs at 1110.65 levels before closing on Friday at 1100 mark. The pair remained supported above the 10-DMA and 50-DMA support located around 1093-1094 range and pierced through 1100 barrier as the shared currency lost its ground against the US dollar and fell back on the 1.08 handle on Friday, driving XAU/EUR higher.

Currently, the pair trades higher around 1100 levels, having bounced-off highs at 1102.40 levels. The pair remains well supported above 50-DMA located at 1094 levels and seems to have formed doji on the daily chart. The daily RSI flat at 55 levels has flattened which also suggest that the pair is awaiting fresh cues for a break on either side. However, USD dominance across the board, the pair is likely to edge higher on euro weakness and may test previous highs at 1110.65 levels before storming its way to test the trend line resistance at 1121.67 levels. However, the pair may reverse and sidle to test the trend line support at 1090 levels if the pair fails to hold the 50-DMA support. Overall, XAU/EUR may remain influenced by dollar moves ahead of German CPI which may provide further direction for the pair.

XAU/JPY pair – Daily Chart

Gold prices in terms of Japanese yen (XAU/JPY) failed to sustain previous gains and ended lower on Friday at 142,621. The pair settled the day well above the crucial 20-DMA support located at 141,194 levels. The gold prices in terms of yen traded lower all through the day in the previous session as the Japanese currency remained support versus the US dollar despite weak Japanese CPI and retail sales data.

The pair now trades near lows at 142,389 levels, bouncing off day’s high around 142,800 levels, capped by 5-DMA located at 142,800. The daily RSI at 47 aims lower suggesting downside in the making. To the upside, the pair faces stiff barrier at 5-DMA levels and may test next resistance at 143k levels beyond that level. However, as the pair has given a symmetrical triangle break down on the daily chart, the pair is expected to test 141,500 levels below a break of a major support at 10-DMA and 20-DMA confluence at 141,900. A host of US macro data which is expected to come out in favour of US dollar may cushion the losses in XAU/JPY.