Gold Analysis: XAU/USD weakness persists, eyes $ 1160

XAU/USD pair – Daily Chart

Gold prices in terms of US dollar (XAU/USD) reversed previous gains and settled lower on Monday at 1169.43 levels, recovering from 1162.82 lows. The pair dropped nearly $ 12 from 1174.46 highs in the previous session largely on the back of strengthening US dollar, which was boosted by tumbling euro following the NO vote victory at Greek referendum while upbeat services sector data from the US also supported the USD bulls, knocking-off XAU/USD lower.

XAU/USD extends its weakness today and trades below 1170 levels as the US dollar strength dominates across the board as markets remain cautious and favour the reserve currency ahead of key Euro group meeting with Greek bailout or possible Grexit on top of the EU officials’ agenda. While US trade figures and JOLTS job opening may further boost the greenback. Hence, the pair is likely to extends declines and could retest 1162.82 (July 6 Low) below which floors will open for a test of 1156.01 (July 2 Low) levels. The daily RSI hovering around 40 has also turned lower, indicating further southward moves likely. While the upside seems limited and restricted to the triangle support-turned resistance and 10-DMA confluence located at 1171.70.

XAU/EUR pair – Daily Chart

Although, gold prices in terms of Euro (XAU/EUR) displayed a triangle breakout to the upside, the XAU bulls failed to defend gains and dropped sharply on Monday, finally ending the day below 1050 levels. The pair witnessed losses despite EUR/USD weakness, largely on the back of generalized selling seen in XAU pairs fuelled by stronger US dollar. While looming Greece concerns keep the pair supported.

As for today’s trade, XAU/EUR opened with a bullish gap and extended gains, riding higher near 1160 levels. The pair seems to trade in a narrow range, locked between 50-DMA placed at 1063 to the upside and the downside cushioned by 5-DMA and triangle resistance-turned support confluence located at 1056-1055 levels. In the day ahead, XAU/EUR is expected to remain buoyed on safe-haven demand as traders remain wary before the upcoming Euro group meeting alongside the Euro Summit with mostly a Grexit to be evaluated by the Euro group minsters. The euro is expected to remain pressured amid Greek talks while ECB’s tougher stance on Greek banks announced yesterday also keeps the shared currency undermined, thereby boosting XAU.EUR somewhat.

Technically, the daily RSI trades just above the mid line in the bull range and now seems to have turned flatter, suggesting a wait and see approach by the markets. Moreover, XAU/EUR is almost forming a small doji on daily charts which too points out to lack of clear direction. To the upside, the pair is likely to test 50-DMA, above which Monday’s high at 1067.09 comes into the picture. While to the downside, a break below the crucial support zone at 1056-1055, selling pressure may intensify dragging the pair lower to the 20-DMA support at 1052 levels and from there to 1050 – psychological levels.