- Opened positions on gold are strongly bullish (72% long / 28% short)
- The immediate resistance for the yellow metal is currently located at 1,148
- At the same time, the nearby support for the bullion is placed at 1,140
- Important economic events to follow in the next 24 hours: Euro zone Final CPI (Jun) and Trade Balance (May), ECB Interest Rate Decision and Press Conference, ECB Greek ELA Decision, Eurogroup Teleconference, Fed Chair Yellen Testifies, US Unemployment Claims (Jul 10)
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Gold traded around its four-month low on Thursday after Fed Chair Janet Yellen hinted a US interest rate hike is likely this year. If the US economy performs in line with Fed's expectations, it will be appropriate at some point this year to start raising the benchmark funds rate, Yellen said. Yet, Fed Chair underlined that the timing of the rate hike is less important than the subsequent path of increases, which are expected to be gradual. A looming US rate hike boosts the Greenback, making dollar-priced assets such as gold more expensive for buyers holding other currencies.
Meanwhile, the Bank of Canada trimmed its benchmark overnight interest rate by 25 basis points to 0.50%, amid a more severe than expected effect of the sharp drop in oil prices and a weak recovery in non-energy sector. The central bank also downgraded its growth estimate compared to its April projection. The economic output is expected to have contracted modestly in the first half of the year, leading to higher excess capacity and additional downward pressure on inflation.
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Yellen to testify for second day in Congress
Janet Yellen, the Fed Chair, testified before the House Financial Services Committee yesterday. Today, however, she will meet the Senate Banking Committee in order to explain the monetary policy stance and decisions of the Federal Reserve. Among core fundamental news on Thursday, the ECB interest rate decision is due at 14:45 PM GMT, which will be followed by the press-conference 45 minutes later. US jobless claims are in turn going to be published by 15:30 PM GMT.Read More: Fundamental Analysis
XAU/USD develops inside bearish wedge pattern on daily chart
Since the second quarter of 2013, the bullion has been developing inside the falling wedge pattern, meaning that trading range is decreasing as time goes on. Two pattern's boundaries are represented by the upper trend-line around 1,270 and pattern's support at 1,115. Among recent developments, in March 2015 the yellow metal resumed gaining value, even without touching the lower trend-line, but the growth stalled beneath the 2009 high at 1,230. In the foreseeable future the rally is likely to be limited and the bullion should be driven by the 200-day SMA around 1,200, which has a slight bearish bias. Some short-term gains in the direction of the long-term downtrend (1,270) are not completely off the table, but bears are eventually going to overtake a lead and drive the metal back to the south. The overall negative tendency for gold seems to be the case in the long run, while at the end of this year the precious metal should to consolidate around 1,150, in case the present trend persists.Daily chart
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A fifth attempt to penetrate the monthly S1 at 1,154 eventually turned to be successful, as bears managed to push gold below this mark. Moreover, losses were subsequently extended below this month's low to reach the daily minimum at 1,143. It seems that the mid-term attention will now turn to the 2014 low at 1,131. However, intermediate supports will try to prevent this from happening. They are represented by the lower Bollinger band at 1,140, followed by the monthly and weekly S2 at 1,137 and 1,133, accordingly.
Hourly chart
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SWFX sentiment strongly bullish toward gold
Meanwhile, OANDA's bulls are in the safe majority with 79.50% of all current positions. Gold's sentiment there is the second most positive among all major crosses at the moment. Saxo Bank market participants are also optimistic towards the precious metal, as there are 72% of bullish trades registered in the morning on July 16.
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Jun 16 and Jul 16 expect, on average, to see Gold trading just below 1,175 by the end of October. At the same time, 54% of them still believe the bullion will be strongly above 1,150 in three months, while 31% of traders surveyed forecast the bullion to trade in the range between 1,000 and 1,150.
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