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Gold Supported Over 50 EMA - Brace for Bullish Setup! 


The yellow metal prices stopped its previous 3-day bullish trend and felt the pull of gravity around the $1,962 level. However, the broad-based U.S. dollar strength from the multi-year low could be considered one of the main reasons behind the yellow-metal fresh selling bias. Whereas, the U.S. dollar recovery rally could be attributed to the U.S. better-than-expected manufacturing data.

On the other hand, the market risk-on sentiment, backed by the hopes of the COVID-19 vaccine, also weighed on the gold price. Elsewhere, the reason behind the risk-on market sentiment could also be associated with the fresh, positive reports suggested the coronavirus (COVID-19) numbers from the U.S. and Australia decreasing gradually. However, the better-than-expected U.S. manufacturing fueled hopes for economic recovery, which also positively impacted the equities.

On the contrary, the looming uncertainty over the U.S. aid package to control the coronavirus (COVID-19) and US-China long-lasting tussle keep challenging the market risk-on tone and could be considered as the major factor that capped further downside for the bullion. AS of writing, the yellow metal prices are currently trading at 1,963.97 and consolidating in the range between 1,958.98 - 1,973.34.

It is worth recalling that the yellow-metal prices undermined on the day after the rosy U.S. data. At the data front, the Institute for Supply Management (ISM) released its manufacturing data late. Its PMI, at 56, was better than the expected 54.5 and 54.2 in July. However, the upbeat data came right after upbeat China and Japan's manufacturing data, which also fueled hopes for economic recovery during the COVID-19 pandemic. Some of the investors remain cautious about this data across the ocean as the ISM data also showed that the U.S. labor market remained in recession territory, which indicates that it is "unnecessary to see the data as entirely great."

As a result of Upbeat U.S. data, the broad-based U.S. dollar managed to erase its previous day's losses and flashed green. Even the U.S. dollar gains were rather unaffected by the upbeat market sentiment and continue holding its bullish bias, at least for now. However, the modest gains in the U.S. dollar kept the gold prices under pressure as the price of gold is inversely related to the U.S. dollar price. Whereas, the U.S. Dollar Index that measures the greenback against a bucket of 6-major currencies rose by 0.03% to 92.362 by 12:33 AM ET (5:33 AM GMT). Moving on, the U.S. dollar may put further bids only if the U.S. will succeed in releasing more relief measures.

The Senate Republicans are expected to introduce a targeted COVID-19 relief bill next week, while U.S. Treasury Secretary Steven Mnuchin told that the Trump administration continues to work on a bipartisan relief package.

Apart from the U.S. data, the market trading sentiment was also being supported by the upbeat China and Japan data, which showed an increase in manufacturing yesterday. China's front, the Caixin manufacturing PMI for August increased to 53.1 from 52.8 in July. Likewise, Japan's manufacturing PMI rose to 47.2 in August from 45.2.

Also, supporting the market trading sentiment could be the latest positive hopes of the coronavirus vaccine. It is worth reporting that the pharmaceutical companies worldwide are stepping towards final tests with one of the top candidates developed by AstraZeneca beginning its trials starting from today. This, in turn, boosted the market trading sentiment and weighed on the safe-haven metal.

At the coronavirus front, the market trading sentiment was further bolstered by the receding coronavirus (COVID-19) numbers from the U.S. and Australia. As in result, the upbeat Market trading sentiment urged the investors to retreat from the safe-haven asset such as gold.

On the contrary, the long-lasting tussle between the two biggest economies remained on the play as both nations do not hesitate to give statements against each other. However, the tension between both nations was recently triggered by the U.S. Secretary of State Mike Pompeo's statement.

Daily Support and Resistance

S1 1916.94

S2 1946.2

S3 1958.29

Pivot Point 1975.45

R1 1987.54

R2 2004.71

R3 2033.96

The yellow metal gold is trading at 1,962 mark, operating over a strong support mark of 1,957 prolonged by double bottom pattern. The XAU/USD may bounce off over 1,959 to target 1,970. Below, 1,958 gold may gain support at 1,940, simultaneously with resistance at 1,987. The major focus will remain on the ADP NFP numbers, which are scheduled throughout the U.S. session.

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