Gold stood resilient to the risk-on flows on Monday as US-China trade optimism sent investors rushing to global equities and emerging market assets.
Although the precious metal will most likely struggle to push higher in the near term as easing trade tensions reduce appetite for safe-haven assets, the medium to longer term outlook remains in favour of Gold bulls. The combination of geopolitical risks and global growth fears have left market sentiment quite fragile while trade disputes could still flare up in the future if no breakthrough deal is achieved. With the Dollar losing its grip on the throne as speculation mounts over the Fed taking a pause on rate hikes this year, Gold remains insulated from extreme downside shocks. The precious metal still has more upside potential, especially when considering how the technicals marry the fundamentals.
Taking a look at the technical picture, Gold is experiencing a correction on the daily charts with the metal in the process of creating a new higher low. While some overbought conditions have been fulfilled according to the Stochastics Indicator, it must be kept in mind that Gold is protected by bullish fundamentals.
A technical breakout back above the $1330 level should inspire bulls to re-challenge $1346 and beyond. If prices end up dipping further, key levels of interest for bulls to trigger a rebound will be around $1317 and $1303. Even if $1303 is breached, the last line of defence will be the psychological $1300 support level.
EURUSD edges higher… but for how long?
The EURUSD’s appreciation today has little to do with a change of sentiment towards the European Economy but rather the Dollar’s weakness.
We see the Euro weakening on growing fears that the Eurozone’s economic slowdown could last longer and more painful than previously expected. With the ECB likely to leave interest rates unchanged throughout Summer 2019 and deeper into the year, the interest rate differentials will work against the Euro. While Dollar weakness has the potential to offer short term support, this will be overpowered by the Europe’s bearish fundamentals.
Focusing on the technical perspective, the EURUSD remains in a bearish trend on the weekly charts with support around 1.1300 and resistance at 1.1500. Bears need to secure a weekly close below the 1.1300 level to open the gates towards 1.1200 and 1.1700, respectively. This setup remains valid as long as prices are able to keep below the 1.1500 resistance which is also coincidentally the recent lower high.
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