- Share of long trades rebounded further to 58%
- Bulls to set eyes on 2013 low at 1,178
- Key demand is placed at 1,131 (2014 low)
- Economic events to watch in the next 72 hours: French, German and Euro zone Manufacturing/Services PMI (Aug), US Manufacturing PMI (Aug), UK Public Sector Net Borrowing (Jul), Canadian Retail Sales (Jun) and CPI (Jul)
Gold in turn rose on Friday following a weaker-than-expected manufacturing data from China and as investors increasingly doubt the Fed will hike rates in September. Business activity in China's manufacturing sector unexpectedly dropped to the lowest level in six-and-a-half years in August despite Beijing efforts to kick-start the economy. The preliminary Caixin China Manufacturing Purchasing Managers' Index plunged to a 77-month low in August of 47.1, compared with a final reading of 47.8 in July. Meanwhile, investors continued to digest the minutes from the Fed's July meeting released earlier in the week, in which the US central bank offered no clear signs of an imminent rate increase.
Among other fundamentals released Thursday, Switzerland's exports declined last month as a strong Franc curtailed demand in the European Union and Asia for Swiss chemicals, pharmaceuticals, machinery and watches. In real terms, outbound shipments plunged 4.9% from a year ago to 17.93 billion Swiss francs, according to the Customs Office, In nominal terms, however, exports plummeted 7.4%. Imports, in contrast, rose 0.2% in real terms to 14.19 billion francs, but were 8.3% lower in nominal terms. As a result, Swiss trade surplus in July was 3.74 billion francs, compared with 3.51 billion a month earlier.
Upcoming fundamentals: UK budget to show surplus in July, Canadian CPI set to weaken
British public finances are forecasted to have ended the previous month with a surplus, which tends to be a seasonal factor in July. Markets expect revenues to exceed spending by 2.3 billion pounds, up from 1.1 billion pounds a year ago and significantly better than a deficit of 8.6 billion pounds observed in June. This data is due at 8:30 GMT today. Meanwhile, Canadian inflation is likely to soften in July, as falling oil prices are putting pressure on the commodity-dependent country. Moreover, additional statistics at 12:30 GMT will include Canadian retail sales for June, which are estimated to pick up just 0.2% on a monthly basis, down from a 1% growth one month before.
XAU/USD is rapidly gaining value
Gold soared to its highest level in five weeks, as Fed minutes forced the Dollar to collapse and restored the metal's safe-haven status. An increase has been $30 per ounce since Thursday morning, while the bullion is now hovering above 100-day SMA at 1,165. Both 2013 low and 200-day SMA at 1,178/87 serve as next main obstacles for bulls. Moreover, the former one is strengthened by the Jul high at 1,175. Therefore, unless the bullion overcomes all of these levels we would suggest the bullish tendency is not stable enough to change our outlook from neutral to positive.Daily chart
In the one-hour chart the precious metal seems to have created a bullish channel pattern with fairly narrow boundaries. Thus, there are downside risks while XAU/USD is trading below the 2013 low. However, bullish momentum should be supported by the recently violated 2014 low at 1,131 and upward-sloping 200-hour SMA, which are helping to keep our outlook on a moderately positive note.
Hourly chart
SWFX sentiment improves further
In the meantime, OANDA share of bulls stays at 58.23% (-3%) of all current positions, while SAXO Bank traders are also optimistic towards gold at the moment, as there are 58% of bullish trades opened by Friday morning.