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  • Risk-off mood fails to help the precious metal on Monday.
  • US Dollar Index stays in the positive territory near 96.
  • Trading action is likely to stay subdued in the second half of the day.

Although risk-aversion seems to be the main market-theme on Monday, the XAU/USD pair remains under pressure amid broad-based USD strength. As of writing, the pair is trading at its lowest level in a week at $1186, losing $16, or 1.35%, on a daily basis.

The lack of progress in the U.S. – China trade talks and ongoing concerns over the escalating tension  between Italy and the EU seem to be weighing on the market sentiment in the first trading day of the week. Major European equity indices are suffering heavy losses to reflect the risk-off mood with Germany’s DAX and the UK’s FTSE indexes losing 0.9%, and 0.67% respectively.

However, the weakening demand for European currencies helped the USD gather strength and didn’t allow gold to take advantage of the risk perception. The US Dollar Index, which advanced to a session high at 96  in the last hour, was last seen at 95.95, where it was up 0.3% on a daily basis. With American traders enjoying the Columbus Day holiday on Monday, the trading volume is likely to thin out in the upcoming hours.

Technical levels to consider

With today’s sharp fall, the RSI indicator on the daily chart turned south below the 30 mark, and the CCI indicator on the same chart broke below the 0 mark, both suggesting that the bearish momentum is gathering strength. On the downside, the pair could encounter the first technical support at $1184 (Oct. 1 low) ahead of $1180 (Sep. 28 low) and $1173 (Aug. 15 low). Resistances, on the other hand, could be seen at $1195 (50-DMA), $1200 (psychological level) and $1208 (Oct. 2 high).