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  • US Dollar Index stays below 96 in NA session.
  • Wall Street starts the day on the backfoot.
  • US 10-year T-bond yields retreat from 7-year highs.

After spending the majority of the day in a narrow trading channel below the critical $1200 mark, the XAU/USD pair gained traction in the last hours and advanced to a fresh session high of $1204.50. As of writing, the pair was up $6, or 0.5%, on the day at $1203.

The greenback, which received strong demand on rising T-bond yields and FOMC Chairman Powell’s hawkish comments yesterday, struggles to build on its bullish momentum on Thursday. Nonetheless, in the absence of significant macroeconomic drivers, the dollar’s price action today seems to be a technical correction. Today’s data from the U.S. showed that after declining by 0.5% in July, factory orders rebounded and increased by 2.3% in August to beat the market expectation of 2.1%. At the moment, the DXY is down 0.3% on the day at 95.70.

Commenting on T-bonds’ performance, “The worldwide spread of yesterday’s sell off in Treasuries, the U.S. 10-year reached a new seven year high of 3.22 percent in Europe, is a warning that the Fed’s rate normalization may be upon us, and at a rush,” FXStreet Senior Analyst Joseph Trevisani said .

In the meantime, major equity indexes in the United States started the day on a weak note to reflect a risk-off mood that benefits safe-havens such as the precious metal. The Dow Jones Industrial Average, which recorded two straight record closes, and the S&P 500 indexes were both last seen down 0.55% on the day.

There won’t be any other macroeconomic data releases in the remainder of the day and ahead of tomorrow’s important NFP report, the risk perception could continue to dominate the pair’s price action.

Technical levels to consider

On the downside, the initial support for the pair aligns at $1200 (psychological level/50-DMA) ahead of $1188 (Oct. 2 low) and $1180 (Sep. 28 low). Resistances, on the other hand, could be seen at $1208 (Oct. 1/2 high), $1214 (Aug. 28 high) and $1220 (Aug. 2 high).