The XAU/USD pair (gold prices in terms of the US dollar) extended its descent into a third-day on Tuesday as the bullion continues to remain pressured amid increasing 2015 Fed rate hike chatter. The pair dropped to 1124.20 lows in the European session after European indices rebounded slightly, thus easing the risk-off sentiment and reducing gold’s demand as a safe-haven. Ahead of the US open, the prices managed to recover lost ground and rallied to 1134.70 daily highs, as the greenback was hit by dismal US goods trade balance data. However, the bullion quickly retraced from highs as the US consumer confidence numbers surprised markets on the upside (103 vs. 96.2 exp.), offering some support to the USD bulls. The pair ended the day in the red at 1125.92, slightly above daily lows.
As for today’s trade so far, XAU/USD looks to have halted its downslide and poses a tepid recovery around 1126.50 levels, as the bulls remain pressured on broad based US dollar strength, awaiting a batch of Euro zone economic releases ahead of the key ADP employment report due later in the NA session. Markets are expecting ADP figures to show a rise to 192k in September, compared to 190k booked previously. Further, Fed Chair Yellen is due to speak later in the US hours and is widely anticipated to reiterate her call for rate-hike this year. Overall, a generalized intraday downside bias persists for the yellow metal as repeated calls for 2015 rate-hike is likely to weigh.
Technicals – Fresh sell-off likely to trigger below $ 1122-1121.50
On 4 hour charts, the prices faced rejection at 5-MA located at 1127.30 and turned slightly lower. However, the prices remain supported above the 100-MA at 1124.40. Hence, a break below the last, the prices could retest the strong support zone located at 1122-1121.40. A failure to resist the key 1121.40 levels, will pave the way for the rounding top pattern breakout. XAU bears will completely take charge thereon, drowning the pair to the crucial support - Fib 127.20% retracement of last week’s rally, located at 1112. The RSI hovers around 37 and turned lower, supporting further southward moves. In case, the pair manages to sustain above 1121.40 levels, the prices could bounce to the confluence zone of 200-MA and 78.60% Fib of the same rally located around 1129.
On daily charts, the prices appear capped below the 50% Fib retracement (Sept rally) at 1127.70 and look poised for further declines, with the daily RSI breaking through the mid-line and trades at 48.50. A break below the 20-DMA located at 1124.35, the prices are likely to drop to the key Fib 61.80% support (of the same rally) located at 1120.65. A break below the last, selling pressure will intensify dragging the pair towards 1110.60, which is the 78.60% Fib (Sept rally) support. However, to the upside, a failure to breach the 61.80% Fib support, gold could rebound towards the above mentioned 50% fib level and further towards $ 1130 – psychological levels.
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