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  • US Dollar Index continues to recover last week’s losses.
  • European stocks record small gains on Mondays.
  • Coming up: Markit’s and ISM’s non-manufacturing PMI reports.

After spending the majority of the day in a tight range near the $1230 handle, the XAU/USD pair lost its traction and slumped to a fresh daily low of $1228 in the last hour. As of writing, the pair was trading at $1228.70, losing 0.35%, $4.30, on a daily basis.

The US Dollar Index, which suffered heavy losses in the second half of the previous week, started the day on a positive note and rose above the 96.50 mark ahead of the non-manufacturing PMI reports that the ISM and the IHS Markit will be releasing later in the session. At the moment, the DXY is up 0.1% on the day at 96.60. Nonetheless, investors might refrain  from making large  bets as they stay focused on tomorrow’s  midterm elections in the United States.

Previewing tomorrow’s event, “A double victory for the Democrats would be problematic for Fed policy.  The tightening cycle requires an economy growing fast enough to support increases without stalling. Markets will assume reduced economic growth. The chance of three 25 basis point increases in 2019 will fade,” said Joseph Trevisani, senior analyst at FXStreet.

Meanwhile, major equity indexes in Europe are staying relatively quiet on Monday with Germany’s DAX and the UK’s FTSE adding 0.15% and 0.35% respectively. Wall Street’s performance today could be the next catalyst for the risk-sensitive precious metal.

Technical levels to consider

The initial resistance for the pair aligns at $1235 (daily high) ahead of $1243 (Oct. 26 high) and $1250 (psychological level). On the downside, supports could be seen at $1225 (Oct. 29 low), $1215 (Nov. 1 low) and $1210 (50-DMA).