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XAU / USD failure at $ 1,800 put bears in control

  • Gold breaks below $ 1,800, bears are targeting $ 1,700.
  • Yields on 10-year US Treasuries rise, supporting demand for the US dollar.
  • Members of the Fed on the week agree on the prospects for a gradual reduction in bonds this year.

The oro it is trading lower during the New York session, trading at $ 1,789.08 down 0.30% at the time of writing. Meanwhile, 10-year US Treasury yields, which plummeted Thursday in a dismal 30-year US bond auction, recovered four basis points (bps) to 1,341%, lifting the dollar. The US dollar index, which tracks the dollar’s performance against six currencies and influences the price of commodities, is up 0.05% to 92.57.

At the beginning of the US session, the US dollar index is trading around 92.36. However, rising yields and mixed market sentiment supported demand for the dollar, triggering the unproductive metal to crash.

The members of the Fed throughout the week have referred to the beginning of the reduction of the assets of the bonds. On Tuesday, the St. Louis Fed, James Bullard, and the New York Fed, John Williams, agreed that the QE reduction will begin later this year. Although markets are familiar with James Bullard’s aggressive stance, New York Fed’s John Williams was a bit of a surprise, thus hinting that Jerome Powell is leaning toward the same stance.

On Thursday, Atlanta Fed Raphael Bostic commented that it will be appropriate to cut the bond buying program sometime this year, adding that he sees the economy in a reasonably strong position.

The final parade of Fed officials for the week was the Cleveland Fed’s Loretta Mester. On Friday, Mester said she sees upside risks to inflation forecasts and would feel comfortable ending the stimulus in the first half of 2022.

XAU / USD Price Forecast: Technical Outlook
Daily chart.

Gold is trading below its major daily moving averages, which suggests that the yellow metal is in a downtrend. The failure of XAU / USD to recover $ 1,800 may open the way to further losses. The first demand area would be the August 19 low at $ 1,774.21. Once it descends from the latter, the next support on the downside is the August 10 low at $ 1,717.79. A decisive break there could push the price to test the 2021 low at $ 1,676.86.

On the other hand, if the XAU / USD recovers $ 1,800, the gold bulls could take a breather. The non-yielding metal would have to wait for a new catalyst that could give it direction.

4 hour chart

In this time frame, gold price action has broken the 200 Simple Moving Average (SMA) to the downside, maintaining the bearish bias. A break below the September 8 lows around $ 1,782.47 could expose the August 19 low at 1,774.21. Should this level break, the next key demand areas would be the August 12 lows of around $ 1,742, followed by the August 10 low of $ 1,717.79.

On the other hand, if the XAU / USD bulls claim the 200 SMA, their next target will be the 100 and 50 SMA, at $ 1,802.36 and $ 1,809, respectively.

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