Gold struggled to shine on Tuesday, falling more than 1% as chaos in the oil markets triggered panic selling across the board and forced investors to raise cash to cover margin calls.
The historic collapse in Oil prices and rising fears over a severe global recession may create another dash for cash, essentially exposing Gold prices to downside shocks. Although the unfavourable global macroeconomic conditions, chaos surrounding the coronavirus outbreak and gloomy outlook for Oil markets could accelerate the flight to safety, Gold may not be the first destination of choice for investors.
Looking at the technical picture, the precious metal is descending lower on the daily timeframe with prices trading around below $1675 as of writing. Sustained weakness below this level could encourage a decline towards $1650 and $1635.
Alternatively, a breakout back above $1675 should trigger a move back to the psychological $1700 level.
Dash for cash boosts Dollar
Everyone wanted a piece of the Greenback after the collapse in Oil prices compounded sent tremors across the board.
The selloff witnessed in Oil prices were so severe and unthinkable that investors sprinted towards the safe embrace of the world’s most liquid currency. Appetite towards the Dollar should remain stimulated by the prevalent themes weighing heavily on investor confidence. As the general uncertainty and unease foster widespread caution, King Dollar is positioned to shine through the chaos.
Focusing on the technical picture, the Dollar Index is pushing higher on the daily charts. A decisive daily close above 101.0 could open the doors towards 103.0. Should 101.0 prove to be reliable resistance, prices could sink back towards 99.90.
Currency spotlight – GBPUSD
Sterling tumbling over 1% against the Dollar on Tuesday and weakened against almost every single G10 as general unease and risk aversion guided investors to more liquid currencies.
Appetite towards the Pound is likely to deteriorate further on Brexit uncertainty and fears around the United Kingdom plunging into an economic recession. As the Dollar appreciate on the safe-haven demand, this could only mean more pain for the British Pound.
Technical traders will continue to observe how the GBPUSD behaves around 1.2300. Weakness under this level should open a path towards 1.2200 and lower. Alternatively, a rebound back above 1.2400 could signal an incline towards 1.2500.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.