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.
This information has been prepared by Mitrade. In addition to the disclaimer below, Mitrade does not represent that the information provided here is accurate, current or complete, and therefore should not be relied upon as such. This information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Mitrade is not a financial advisor and all services are provided on an execution only basis. We advise any readers of this content to seek their own advice. Reproduction or redistribution of this information is not permitted.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.