XAU/USD Current price: $2,297.49
- Softer-than-anticipated US Producer Price Index figures temporarily boosted the mood.
- Wall Street's poor performance reflects a sour mood, backing demand for the US Dollar.
- XAU/USD turned bearish and aims to pierce the weekly low at $2,286.69.
After a volatile Wednesday, the US Dollar recovered the ground lost following United States (US) first-tier events, pushing higher even against the safe-haven Gold in a risk-averse environment. XAU/USD trades below $2,300 a troy ounce, trimming weekly gains.
The US Dollar turned lower mid-European morning following the release of encouraging US inflation-related data. The US Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) rose 2.2% YoY in May, easing from the 2.3% increase posted in April and below expectations for a 2.5% advance. On a monthly basis, the PPI declined by 0.2%.
The optimism was short-lived as US indexes turned sharply lower after the opening, pushing the Greenback higher across financial boards. At the time being, only the Nasdaq Composite trades in the green, up a modest 0.29%. The Dow Jones Industrial Average is the worst performer, down 225 points.
The upcoming Asian session will bring the Bank of Japan's (BoJ) monetary policy decision. Market participants speculate the central bank will probably leave interest rates unchanged, although policymakers may also announce a reduction in bond purchases.
XAU/USD short-term technical outlook
The daily chart for XAU/USD shows that the risk of a bearish breakout has increased. The pair is trading below a firmly bearish 20 Simple Moving Average (SMA), while technical indicators resumed their slides within negative levels, in line with another leg lower. The 100 and 200 SMAs keep heading higher well below the current level, although they remain too far to become relevant. The weekly low at $2,286.69 is the immediate support level.
In the near term, and according to the 4-hour chart, the bearish case is even stronger. XAU/USD accelerated south after sliding below a now flat 20 SMA. Furthermore, the 100 SMA is crossing below the 200 SMA, both far above the shorter one. Finally, technical indicators crossed their midlines into negative territory, and maintain firmly bearish slopes, reflecting persistent selling interest.
Support levels: 2,286.70 2,271.90 2,258.30
Resistance levels: 2,308.80 2,321.55 2,333.10
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