XAU/USD: dollar will receive support from fundamental data

Current trend

In the end of June the price of gold changed direction and the metal got cheaper due to the fall of demand for safe haven assets. An additional catalyst for the fall of the quotes was the decision of FOMC to increase the key interest rate and reduce the stimulation program.

This week’s upward correction was caused by different opinions of FOMC representatives. A part of them continues to support the idea of further increase of the interest rate and tightening of the monetary policy. Others point out that the fundamental background does not meet the suggested measures. The main sectors of the economy such as inflation and labor market do not show necessary improvements therefore the existing volume of stimulation should be preserved.

Today a number of key macroeconomic releases are due from the USA. They may determine further dynamics of the pair. Special attention should be pair to retail sales, inflation, and industrial output data.

Support and resistance

By now gold price has reached the upper border of the downward channel. Weak data on USD may help the metal to move away from the current tendency. Consensus forecasts indicate possible growth of indicators which will help the price trade in the current trend and form a downward wave to new local minimums. The main scenario will be the consolidation of the price in the downward tendency with target at 1195.50 (local minimum of March 2017).

Technical indicators confirm the fall outlook: MACD indicates the preservation of the high volume of short positions, and Bollinger Bands are still directed downwards.

Support levels: 1215.00, 1204.75, 1195.50, 1190.30, 1182.85, 1172.00.

Resistance levels: 1226.00, 1241.00, 1267.40, 1281.00, 1295.70.

Trading tips

Long positions may be opened above the level of 1228.72 with targets at 1241.00-1267.00 and stop-loss at 1214.00.

Short positions may be opened below 1222.00 with targets at 1182.85 and stop-loss at 1235.00.