Gold Analysis: XAU/USD could drop to $1180

XAU/USD pair – Daily Chart

Gold prices in terms of US dollar (XAU/USD) witnessed sharp moves on Monday, swinging between gains and losses, having finally closed the day in red at 1189.02 levels. Gold prices spiked to 1204.33 highs after weak PCE inflation figures, although immediately reversed gains and dropped to lows at 1184.49 following upbeat manufacturing PMI and construction spending data which refuelled rate hike bets this September, dulling the attractiveness as an alternative higher yielding asset.

XAU/USD extends declines today and trades near lows around 1187 levels despite mild USD weakness as traders continue to remain wary on increased Fed rate hike bets, thereby favouring the greenback. On the daily charts, the pair seems to have breached the 5-DMA support located at 1188.52 and inches lower towards the channel support placed at 1183.82. The daily RSI at 43 has turned lower indicating further bearish bias persists. Hence, to the downside, a break below the channel support of 1183.82, the pair could drop to the immediate support at 1179.97 (May 28 Low) levels and below that at 1175 (April 24 Low) levels.

In the day ahead, we have US factory orders data which expected to remain muted in May after a previous rise by 2.1% in April. However, the USD bulls may remain unaffected by this data and continue to weigh on XAU/USD. In case the data misses expectations by a big margin, the pair could rebound higher to 1190 levels and extend further for a retest of 10-DMA resistance located at 1196.

XAU/EUR pair – Daily Chart

Gold prices in terms of Euro (XAU/EUR) spiked to daily highs above 1100 levels on Monday, breaching key 100-DMA and 50-DMA resistance located at 1092.57 and 1093.17 levels respectively after the XAU bulls were boosted by a broadly weaker shared currency largely pressured on Greece debt woes. However, the pair failed to sustain above 1100 threshold and retraced to 1082.30 lows after a generalized USD strength pushed XAU lower across the board. Although the pair managed to fight back losses and ended higher at 1088.69.

At the moment, XAU/EUR trades lower near 1086.50, with the upside capped by 10-DMA resistance located at 1089.40. The pair is seen struggling around 5-DMA placed at 1086.44 and is poised to test the rising trend line support of 1082.90 levels. The daily RSI at 50.80 aims lower and may breach the mid lines to enter the bear range. Also, the shared currency remains well bid above 1.09 handle versus the US dollar, which drags the XAU/EUR pair lower. The upcoming Euro zone flash CPI is expected to add 0.2% in May on a monthly, and 0.7% on an annual basis. The data is further likely to bolster the euro, which could drag the pair lower to the immediate support of 1078.30 levels, below which floors would open for a test of 20-DMA located at 1077 levels. The upside seems restricted to the confluence zone of 100-DMA and 50-DMA located around 1093 levels.

XAU/JPY pair – Daily Chart

Gold prices in terms of Japanese yen (XAU/JPY) faced rejection at 149,500 levels and rebounded sharply lower from fresh four month highs on Monday to finish the day in green at 148,464. The pair witnessed nearly 2500 pips movement yesterday after the yen weakened to fresh 12 year highs versus the US dollar followed by upbeat US fundamentals. XAU/JPY gave a bullish channel breakout on daily charts, climbing higher above all the major moving averages.

XAU/JPY turned slightly lower today having broken below the channel trend line resistance-turned support located at 147,995 and reached fresh lows at 147,864. However, the pair managed to bounce-off lows and trades near 148,140 levels as the USD/JPY pair halted its winning streak and retraced fresh multi-year highs of 125.06 reached earlier today largely on profit-taking after the recent upsurge. Hence, XAU/JPY remains pressured on a stronger yen while the daily RSI at 64.20 aims lower, also suggest more room for declines. To the downside, the pair could drop to 5-DMA support located at 147,640 levels, below which selling pressures may intensify dragging the pair to 147k barrier. To the upside, a break above daily highs at 148,495 levels would only confirm resumption of the ongoing upside momentum.