Gold Price Analysis: XAU/USD bulls pause run-up to $1,800 on cautious markets

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  • Gold struggles to extend Wednesday’s recovery, seesaws near the top.
  • Markets turn dicey ahead of US NFP, amid mixed updates on covid, vaccine.
  • US 10-year Treasury yields print four-day downtrend as Fed policymakers reject reflation fears, US data came in soft.

Gold wavers inside a $2 trading range below $1,788 during the initial Asian trading session on Thursday. The yellow metal recovered the previous day as a slightly positive market mood weighed down the US dollar. Also contributed to the bullion’s strength could be the receding reflation fears. It should, however, be noted that Wall Street’s mixed performance and the pre-NFP cautious sentiment seem to test the bulls of late.

A dull day ahead?

Although a return of traders from China and Japan, who are readying for the week-start trading, could entertain Asian traders, a lack of major data/events and the market’s cautious mood ahead of Friday’s key US employment report for Thursday may tame the moves.

Even so, the coronavirus (COVID-19) and the vaccine updates that will join China’s reaction to the Western dislike may offer intermediate moves.

On Wednesday, US Federal Reserve officials rejected the fears of reflation and slightly weaker-than-expected prints of ADP Employment Change, as well as ISM Services PMI, which justified the cautious optimism. Recently, Boston Federal Reserve President Eric Rosengren said on the Bloomberg TV interview that it’s premature to talk about tapering.

Amid these plays, Dow Jones Industrial Average (DJI30) refreshed its record top but Nasdaq dropped for the fifth consecutive day. Further, the US 10-year Treasury yields dropped 2.3 basis points (bps), marking the fourth day of downside while S&P 500 Futures decline 0.05% by the press time.

Looking forward, second-tier readings from Europe and the BOE’s Super Thursday could keep traders busy even as no major moves are anticipated ahead of the key day comprising the US employment report.

Technical analysis

Gold funnels down the area between 100-day SMA and 21-day SMA, respectively around $1,798 and $1,770, wherein a three-week-old rising trend line and upbeat MACD favor buyers. However, a clear break above $1,800 becomes necessary for the bull’s return.

 

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