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Gold Advance Capped- Bullish Setup at Risk Below $1130

Gold Advance Capped- Bullish Setup at Risk Below $1130

David Song, Strategist

Talking Points:

- Gold Rebound Capped by Former Support; Bullish Formation at Risk.

- NZD/USD Bullish Momentum Fizzles; NZ Trade Deficit to Widen.

- USDOLLAR Outlook Remains Mired by Mixed Data- Durable Goods Orders on Tap.

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XAU/USD

XAU/USD Daily

Chart - Created Using FXCM Marketscope 2.0

  • Gold may continue to give back the rebound from earlier this month following the failed attempt to push back above former support around $1168 (61.8% expansion) to $1169 (38.2% expansion); may see price fail to retain the near-term upward trend as the bullish RSI momentum fizzles, which lines up with $1130 (61.8% expansion).
  • Despite the policy action from China (interest rate & RRR cut), the weakening outlook for global growth may continue to foster a bearish outlook for the precious metal as demand falters.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long XAU/USD, but the ratio has come off of recent extremes to hold at +1.14, with 53% of traders long.

NZD/USD

NZD/USD Daily Chart
  • NZD/USD may come under pressure as New Zealand’s Trade Balance figure is expected to show a widening deficit of 600M in July; bearish RSI trigger favors approach of looking for opportunities to sell-bounces.
  • Still seeing heavy speculation for another 25bp rate cut at the Reserve Bank of New Zealand’s (RBNZ) next meeting on September 9; long-term forecast remains bearish amid the deviation in the policy outlook.
  • Need a close below near-term support around 0.6370 (50% expansion) to 0.6400 (61.8% retracement) to favor a resumption of the bearish trend.

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Read More:

Price & Time: Major Global Equity Rout Or Rebound?

Webinar: Global Equity Rout Fuels Massive Spike in FX Volatility

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11901.5211906.3811838.650.57113.07%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar appears to be finding near-term support around the Fibonacci overlap between 11,826 (61.8% expansion) to 11,843 (38.2% retracement), but the ongoing series of lower-highs raises the risk for a further decline as the bearish RSI momentum remains in play.
  • With U.S. Durable Goods Orders expected to contract 0.4% in July, signs of slower consumption may drag on interest rate expectations as market participants scale back bets for the Fed liftoff in September.
  • Need a closing price below 11,826 (61.8% expansion) to 11,843 (38.2% retracement) to favor a move into the next downside target around 11,745 (50% retracement) to 11,759 (23.6% retracement).

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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