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  • DXY gains traction in the NA session and rises toward mid-96s.
  • Gold fails to stay above $1200 and extend losses.

Following a correction to 96.15, the US Dollar Index gathered momentum in the NA session and forced the XAU/USD pair to plummet to its lowest level since early 2017 at $1192. As of writing, the pair was trading at $1194, losing $17.5, or 1.45% on the day.

Although another wave of risk-aversion seems to be dominating the markets in the second half of the day, the precious metal struggles to find demand. The flight-to-safety that was triggered by the TRY collapse on Monday ramped up the demand for the greenback. Meanwhile, the lack of macroeconomic data releases on Monday allows investors to remain focused on the TRY movements and the potential spill-over effects on the global economic growth.  

Commenting on that matter,  “some market pundits continue to claim that developments in Turkey will remain contained to that country. We heard similar comments just before the Greek crisis. Yet, it is worth noting that foreign banks’ exposure to Turkey ($260 billion) is just as large as in Greece circa 2008,” NBF analysts wrote in a recently published report.

Technical levels to consider

On the downside, supports could be seen at $1192 (daily low) ahead of $1185 (Jan. 26, 2017, high) and $1180 (Jan. 27, 2017, low).  Resistances align at $1200 (psychological level), $1212 (daily high) and $1218 (20-DMA).