Gold Review: Drops to fresh session low, now seems vulnerable

Haresh Menghani FXStreet

• Surging US bond yields help ease USD bearish pressure and prompt some fresh selling.
• Fading safe-haven demand, amid easing global trade tensions adds to the downward pressure.
• Technical studies point to a possible resumption of the well-established bearish trend.

After an initial uptick to $1235 area, gold met with some fresh supply and has now eroded a part of gains recorded in the previous session.

Persistent US Dollar selling pressure, which tends to underpin demand for dollar-denominated commodities contributed to the initial uptick during the Asian session on Thursday. However, a goodish pickup in the US Treasury bond yields helped ease the USD bearish pressure and prompted some fresh selling around the non-yielding yellow metal.

This coupled with easing global trade tensions after the US President Donald Trump and European Commission President Jean-Claude Juncker agreed to work towards eliminating trade barriers, further weighed on the precious metal's safe-haven appeal and collaborated to the ongoing retracement slide.

Technical Analysis

The commodity is retreating from weekly tops, set on Monday, which now seems to constitute towards forming a bearish double-top chart pattern on the 1-hourly chart.

Meanwhile, the latest leg of downfall over the past hour or so could also be attributed to some technical selling below a short-term ascending trend-line support on the 1-hourly chart.

Technical indicators have also started losing positive momentum and hence, a follow-through weakness, back closer to $1224 horizontal support, now looks a distinct possibility.

A convincing break below the mentioned support would confirm the bearish formation and pave the way for the resumption of the commodity's prior depreciating move.

Spot rate: $1228
Daily High: $1235
Trend: Turning bearish again

Resistance
R1: $1235 (weekly tops)
R2: $1241 (horizontal zone)
R3: $1249 (July 12 swing high)

Support
S1: $1224 (horizontal zone)
S2: $1218 (weekly low set on Tuesday)
S3: $1212 (YTD swing low touched on July 19)

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.