Gold Analysis: XAU/USD: Looks to test 1140-1146 levels post ECB

Gold prices in terms of the US dollar (XAU/USD) halted its 5-day rally and ended Wednesday in the red at 1133.13, miring near daily lows at 1132.12. Gold prices eased yesterday as the US dollar kept its upside bias intact amid rebounding global equities, ignoring the below estimates US ADP employment report. The number of Americans employed in the US private sector increased by 190,000 in August, against expectations of 200,000 additions. As noted yesterday, the prices remained supported above the 50-DMA support located at 1130 levels. While the 10-DMA at 1141 levels acted as a strong resistance, capping further upside.

As for today’s trade so far, XAU/USD is trading lower, stuck in a tight range of $3, as markets remain cautious ahead of the key European Central Bank (ECB) monetary policy meeting followed by ECB Chief Draghi’s speech. Many economists think that the ECB may turn out to be dovish in wake of the recent financial market turmoil and persisting lower EZ inflation levels. This may emerge as US dollar positive, thereby negatively impacting gold prices. Hence, traders refrain from creating fresh positions and stick to the wait and see approach.

Technicals – Clinging to Fib support

XAU/USD is trading listless near 1133 levels with 1131.50 (Fib 61.80% of the July fall) acting as a strong support. A break below the last, the pair could test 50-DMA and 20-DMA confluence located at 1128.50/80 zone. The daily RSI hovering around 53 has turned flatter while the prices have formed a small doji candle on daily charts, both indicating lack of clear direction as markets await fresh cues from the ECB ahead.

To the upside, a break above the 5-DMA resistance at 1135, the pair could climb further for a test of a downward sloping 10-DMA located at 1138.50. If the prices manage to break above the last, the upside barrier at 1142.47 (Sept 2 High) would be next in sight. Overall, gold prices may keep the range intact and likely to extend higher post ECB.

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