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  • Gold plummeted to its lowest level since January 2017 at $1194.66 on Monday.
  • US Dollar Index erases gains, finds support near 96.15 and gains traction in the NA session.

The troy ounce of the precious metal dropped to its worst level in nearly 20-months at $1194.66 earlier today before recovering above the critical $1200 mark. However, the pair lost its momentum after rising toward the $1203 mark and reversed its course. At the moment, the pair was trading at $1196, losing more than $15 on the day.

Despite the risk-off mood, the pair came under pressure during the day as the broad-based greenback strength offset the demand for the safer gold. Nevertheless, with the USD/TRY pair stabilizing below the 7 mark, the US Dollar Index started to retrace its daily gains and allowed the pair to rise above the $1200 handle. After touching a fresh session low at 96.15, the US Dollar Index turned flat on the day near 96.25 as the improving sentiment boosted the 10-year T-bond yields in the American trading hours.

In the meantime, major equity indexes in the U.S. started the day slightly higher to further weigh on safe-havens. However, both the Dow Jones Industrial Average and the S&P 500 indexes, which failed to push higher, suggest that investors are still not convinced that the EM meltdown is over.  

With a lack of macroeconomic data releases in the remainder of the day, the risk perception is likely to remain the main driver of the pair’s price action.

Technical outlook

Only with a daily close above $1200 (psychological level), the pair could extend its recovery towards $1212 (daily high) and $1218 (20-DMA). On the downside, supports are located at $1194 (daily low) ahead of $1185 (Jan. 26, 2017, high) and $1180 (Jan. 27, 2017, low).