Gold: A deeper pullback looks likely below $1920 – UOB

Pablo Piovano FXStreet

Markets Strategist at UOB Group Quek Ser Leang gives his views on the prospects for the yellow metal.

Key Quotes

After spot gold soared to a high of $2,072… we noted that ‘The advance to $2,072 lacks momentum as can be seen in the daily MACD which is barely positive’. However, we highlighted that spot gold ‘has the potential to rise further towards the top of the rising wedge near $2,100 before the risk of a reversal increases’. We added, ‘If spot gold falls below $2,020, it will most likely test $1,963’.

Spot gold not only broke below $2,020 in the middle of last month but also $1,963. On Tuesday (30 May 2023), it fell further to a low of $1,932. The low appears to have slightly breached both the 21-week exponential moving average and the rising trendline connecting the lows of October last year and March this year. The price actions, combined with the weekly MACD turning negative (as of last week) suggest an increasing risk of a bearish reversal.

However, spot gold has to break the support at the bottom of the daily Ichimoku, now at $1,920, before it could weaken towards $1,870 (the current level of the 55-week exponential moving average). The risk of spot gold breaking clearly below $1,920 will remain intact in the next month or so as long as it does not move above the top of the daily Ichimoku cloud, currently at $1,992.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.