Gold to test senior downtrend

Source: Dukascopy Bank SA
  • 62% of all SWFX open positions are long
  • Pending orders optimistic with 52% to buy
  • Gold opened Friday's session at 1,159.21
  • No economic events to watch over the next 24 hours
Gold respected the upper boundary of the month-long channel seen on the hourly chart, and opened with a red candle with directional risk at the senior downtrend of 1,149.11. The pair's actions are likely to be of clear technical nature as there are no significant fundamental events on Monday. We expect EUR/USD to bounce from the aforementioned level today, meaning that a close below is rather unlikely. A newly-established junior channel down is currently guiding the motion south.

The mood of American shoppers improved markedly in December, following Donald Trump's surprise victory in the US presidency elections, official figures revealed on Friday. The University of Michigan reported its preliminary Consumer Sentiment Index jumped to 98.0, the highest reading since January, while marked analysts anticipated a slighter improvement to 94.3 from November's 93.8 points. Confidence among consumers rose shortly after the elections. The Current Conditions Index, which measures the way consumers feel about the present state of the economy, advanced to 122.1 in December from the preceding month's 117.3 points, the highest level since 2005. A record number of survey respondents pointed to the positive effects of new policies. Furthermore, the survey showed the proportion of people expecting the economy and labor market to improve next year also increased in the reported month. The gauge of expectations six months from now climbed to 88.9, the highest since January 2015, following the prior month's 85.2 points. Consumers' inflation expectations for the next year declined to 2.3%, the lowest level since 2010, compared with November's 2.4%, while their expectations for inflation over the next 10 years fell to 2.5% from 2.6%.

The US unemployment rate fell to a nine-year low in November, adding to expectations that US interest rates will rise later this month. Figures from the Labor Department showed the US economy created 178,000 jobs in November, while the jobless rate fell to 4.6% from 4.9% in October. The first employment report since voters went to the polls last month shows an economy in strong shape as President-elect Donald Trump prepares to take office. The unemployment rate fell to levels not seen since August 2007, before a bubble in the U.S. housing market began to burst. The fall was driven partly by the creation of new jobs and partly by people retiring and otherwise leaving the labor force. In addition, average hourly earnings in the US fell more-than-expected last month touching a seasonally adjusted -0.1%, from 0.4% in the preceding month. The data release comes ahead of the Fed's meeting, when the central bank is expected to announce its first interest rate increase in a year.

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No economic events to watch over the next 24 hours

While there are no high impact economic events that could shake up the XAU/USD market on Monday, the pair will feel some fundamental pressures on Wednesday when the United States will be in spotlight amid loads of fundamental data releases.



Gold approaches senior downtrend

Daily chart: Gold returned inside of the channel down pattern it had exited the sessions before, and opened with a red candle Monday morning. The pair is once again steadily approaching the senior downward sloping trend-line, which will cut the losses at 1,147.04. If XAU/USD respects the aforementioned boundary, the channel will eventually have to break in order to take on a southward motion of flatter nature. The downtrend is currently bolstered by the bottom Bollinger Band and weekly S1, which makes us strongly believe that a break below is unlikely.

Daily chart
© Dukascopy Bank SA

Hourly chart: The hourly chart sketches an apparent junior channel down pattern, which is leading the movements to the senior downtrend inside of the senior channel. Downward potential is confirmed by the 55 and 100-hour SMA crossover, which have established a death cross formation. In case the pair remains inside of the channel boundaries, the trend-line could be reached today already and a bounce could extend from there on.

Hourly chart
© Dukascopy Bank SA


SWFX sentiment stays the same

Positive sentiment shows that Gold is bought in 62% of all cases, up from 60% the six consecutive sessions before, and pending commands show the same number, which is a 3% increase from the last session.

The optimistic OANDA Gold traders have maintained their positive sentiment as open positions were 79.04 long, compared to 79.21% on Friday. Meanwhile, traders of SAXO bank seem to have decreased their bullish stance, as Monday showed 67.36% of traders betting the metal will surge, compared to 68.56% during the previous session.

Spreads (avg,pip) / Trading volume / Volatility


Market participants foresee the price of gold at 1,265 by March

Traders who were asked regarding their longer-term views on gold between November 12 and December 12 expect, on average, to see the metal around 1,265 in early March. Generally, 42% (-2%) of participants believe the price will be above 1,300 in ninety days. Alongside, 36% (+1%) of those surveyed reckon the currencies will trade in the range between 1,150 and 1,300 over the next three months.

© Dukascopy Bank SA

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