- 57% of all SWFX open positions are bearish
- Prices fluctuating around 1,325 level
- Gold surged on release of the UK Referendum results
- Price to be supported by the 2015 high at 1,307/05
- Economic events to watch over the next 24 hours: US International Trade in Goods (May); US PMI Services (June); EU Parliament to Vote on Resolution on UK Referendum.
On Tuesday the head of the Federal Reserve, Janet Yellen, stated that there is ‘considerable uncertainty' in US growth outlook. She also brought to attention the fact that some data suggests the US economy keeps growing, but some events, like the upcoming ‘Brexit' referendum, bring the mentioned uncertainty. According to Yellen, the US economy is expected to reach full employment and its 2% inflation target within the next few years. Growing household incomes, improvements in the housing industry, along with low mortgage rates, should trigger improvements in the labour market to appear and, therefore, in the economy overall. Furthermore, Janet Yellen touched the question of the interest rates, explaining that the FOMC has been hesitant to do so due to periodicallydisappointing readings in the labour market, as well as inflation remaining below its key target. Also, she assured that some weakness in the labour market should not be considered as a game changer in the Fed's monetary policy decision, as there were strong readings present too. Finally, she warned about foreign risks, such as the slowdown in global economy, lower inflation and interest rates may cause investor risk appetite to arise. Amid these issues and concerns, the US monetary policy is not
On Friday the US Durable and Core Durable Goods Orders were released, both failing to meet expectations. The Durable Goods Orders dropped 2.2% in May, while the forecast stood at a 0.5% decline. At the same time, the April's reading was revised down from 3.4% to 3.3%, contributing to the negative effect the actual weak reading had. Furthermore, the Core data, which excludes the transportation sector, also disappointed, having edged lower fro, 0.5% to –0.3%, compared to the 0.1% forecast. Nevertheless, the main reason of the depressing results was exactly the transportation sector, as it plummeted 5.6% during the previous month. As a result, weakness in these factory orders justify Janet Yellen's concerns of possible economic threats the US might be facing. She stated on her testimony earlier that week that not only falling oil prices, but also weak business investments are an issue for the US economy. Moreover, due to the relatively poor reading of the US Manufacturing PMI last Thursday, which showed that demand for manufacturing and drilling equipment was lower, the factory orders are unlikely to post significantly better numbers in the next few months. On top of that oil prices plunged even further, amid UK leaving the European Union, creating only more problems not only for the US, but for the global economy overall.
Upcoming fundamentals: US data and EU Parliament vote
Fundamental data, which will affect the XAU/USD pair will come from the US on Monday, as US International Trade in Goods for May will be released at 12:30 GMT, and US PMI Services is set to be published at 13:45 GMT. However, most important data in the next 24 hours is coming from the EU Parliament, as its members are set to vote on the Resolution on UK Referendum tomorrow morning at 8:00 GMT.
Gold reaches 1,325 level on Monday
Daily chart: As the bullion surged on Brexit vote results, it saw huge volatility by even reaching the 1,358 level at a certain point. However, the yellow metal closed the previous trading session at 1,315.73. With the start of a new week, on Monday, the metal started a new trading session and opened at 1,321.09. In addition, gold has been surging since the opening and remains highly volatile, as it touched the 1,335 level. At the moment, the commodity is trading at 1,325 by 7:15 GMT. In the meantime, aggregate technical indicators forecast a surge for the metal today.Daily chart
Hourly chart: In the hourly chart it can be seen that gold has been very slowly raising since its huge surge in value after the Brexit vote results. At the moment, the yellow metal is about to meet the support provided by the 20-hour SMA at 1,321.72, and if it drops below it, the metal will move lower to the weekly PP at 1,307.95, which is also supported by the lower Bollinger band. In the meantime, considering the general situation and the aggregate technical indicators, it is most likely that the bullion will move up to the monthly R2 at 1,342.10.
Hourly chart
SWFX traders continue to stay bearish
Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 64.66%. In addition, SAXO bank clients are also bullish on the yellow metal, as 57.04% of positions are long.