|

Trading currencies investment forecast: USD and XAU

Gold (XAU/USD) continues to shift to new yearly highs, at above US$1,800oz there is little sign of it breaking back below the US$1,652oz support level that would have seen a bearish signal, and every chance it will test the resistance band at US$1,830oz.

What is also clear from XAU/USD trading versus other fiat currency pairs is that ‘perception’ of risk is varying wildly.

This concept is perfectly highlighted by Fed Chair Powell’s testimony to the Democratic-led Senate in which he stated:

‘While this bounce back in economic activity is welcome (reflecting a resumption in activity), it also presents new challenges’…’[It’s] extraordinarily uncertain and will depend in large part on our success in containing the virus,’

He went further stating that‘a full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.’

The final part of his testimony reiterating the Fed’s overall position:‘[We are] committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.’

It’s a stark reminder that the US is far from through the worst of what COVID-19 could bring. And that the second wave flare-ups in the likes of Texas, Florida, Arizona, and Nevada could derail the recovery and all the gains the US had made thus far. It certainly feeds into the XAU/USD movements and a risk off view.

Yet like we discussed last week the USD is finding further support lacking, and this is despite the second wave risks.

AUD/USD rebounded this week to be back in the $0.69 handle despite the reintroduced lockdowns in the state of Victoria. EUR/USD is pushing into the upper levels of $1.12 on the better economy data from the US and elsewhere. The JPY is also losing ground as risk currencies see inflows. A clear risk-on move in fiat currencies.

In short, it’s an interesting trading environment and we understand why XAU/USD is continuing to see long positions. There is a strange equilibrium in-play at the moment between Risk-On and Risk-Off.

Author

Mitrade Team

Mitrade is a global CFD provider based in Melbourne, Australia.

More from Mitrade Team
Share:

Editor's Picks

EUR/USD treads water above 1.1850 amid thin trading

EUR/USD stays defensive but holds 1.1850 amid quiet markets in the European hours on Monday.  The US Dollar is struggling for direction due to thin liquidity conditions as US markets are closed in observance of Presidents' Day. 

GBP/USD flat lines as traders await key UK and US macro data

GBP/USD kicks off a new week on a subdued note and oscillates in a narrow range near 1.365 in Monday's European trading. The mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold sticks to intraday losses; lacks follow-through

Gold remains depressed through the early European session on Monday, though it has managed to rebound from the daily trough and currently trades around the $5,000 psychological mark. Moreover, a combination of supporting factors warrants some caution for aggressive bearish traders, and before positioning for deeper losses.

Bitcoin, Ethereum and Ripple consolidate within key ranges as selling pressure eases

Bitcoin and Ethereum prices have been trading sideways within key ranges following the massive correction. Meanwhile, XRP recovers slightly, breaking above the key resistance zone. The top three cryptocurrencies hint at a potential short-term recovery, with momentum indicators showing fading bearish signs.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.