- Gold price remains mildly bid amid cautious optimism, hopes of more stimulus.
- Fortnight-old resistance line restricts immediate XAU/USD upside amid firmer RSI.
- Risk-on mood, full markets favor DXY pullback from 20-year high ahead of key PMI data.
Gold price (XAU/USD) portrays a corrective pullback as bulls retreat from intraday high to around $1,720 during early Tuesday morning in Europe. While technical hurdles and doubts over the early Asian session optimism probe the metal buyers of late, softer US Dollar Index (DXY) and hopes of more stimulus from Europe, China and the UK seem to keep XAU/USD buyers positive.
Market sentiment improved during the early Asian session after the return of full markets brought expectations of more measures to tame the energy crisis. That said, the incoming UK PM Liz Truss is up for a £130 billion energy plan while the People’s Bank of China (PBOC) cuts the Reserve Requirement Ratio (RRR). Further, politicians from Germany/Eurozone are all in to battle with the recession woes with a heavy push to defend energy companies and stock for winters.
Amid these plays, the US 10-year Treasury yields rise 2.5 basis points (bps) to 3.21% whereas the S&P 500 Futures extend the week-start recovery to 3,943, up 0.50% intraday by the press time. Further, the market’s consolidation also allowed the DXY to retreat from the 20-year high to 109.37, before a recent rebound to 109.62.
That said, the CME’s FedWatch Tool hints at the 60% chance of the Fed’s 0.75% rate hike in September, versus over 75% marked in the previous week. The easing in the hawkish Fed bets could be linked to the mixed US jobs report for August.
It should be noted that the reaction of the traders from the US and Canada will be closely observed for clear directions. Also important will be the geopolitical headlines surrounding China, Russia and the US. Additionally, the ISM Services PMI for August, expected 55.5 versus 56.7 prior, should offer additional directions to the XAU/USD bulls.
Technical analysis
The bullish RSI divergence needs validation from the 50-SMA, as well as a two-week-old resistance line, respectively around $11,724 and $1,730, to convince the gold buyers. Even so, the 200-SMA hurdle surrounding $1,753 could act as a tough challenge for the XAU/USD buyers before retaking control.
In a case where gold price remains firmer past $1,753, the late August swing high near $1,765, could act as the last defense for the bears.
Alternatively, pullback moves could aim for the $1,700 threshold before directing the bears towards the yearly low surrounding $1,680.
Overall, XAU/USD remains bearish unless crossing $1,765. However, an intermediate rebound of the metal can’t be ruled out.
Gold: Four-hour chart
Trend: Limited recovery expected
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