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  • Gold touched fresh 20-month low at $1160 on Thursday.
  • Broad-based USD weakness paves the way for a recovery.
  • Wall Street rises sharply to reflect a higher risk appetite.

In the first trading hour of the Asian session, the XAU/USD pair, which started the week at $1212, extended its losses and touched its lowest level since January 3, 2017, at $1160. However, a sharp fall witnessed in the USD/CNY pair weighed on the greenback and helped the precious metal finally start retracing its losses.

In the second half of the day, the mixed macroeconomic data releases from the U.S. dragged the US Dollar Index lower and the pair reached a fresh session high at $1182. The initial jobless claims in the U.S. edged down to 212K and the building permits increased by 1.5%. On the other hand, Philly Fed Manufacturing Index dropped to 11.9 in August from 25.7 in July and fell short of the market expectation of 22. At the moment, the DXY is down 0.12% on the day at 96.60.

In the meantime, major equity indexes in the U.S. started the day on a positive note amid easing concerns over the trade conflict between the U.S. and China. The improved sentiment in the NA session is not allowing the  safe-haven gold to continue to strengthen against the buck.

Technical outlook

Despite today’s recovery, both the RSI and CCI indicators on the daily chart remain in the oversold territory, suggesting that sellers are unlikely to take control of the price action before the correction gets deeper. On the upside, resistances for the pair could be seen at $1194 (Aug. 15 high), $1200 (psychological level) and $1210 (20-DMA). Supports align at $1160 (daily low), $1165 (Jan. 5, 2017, low) and $1155 (Dec. 9, 2016, low).