- Share of long open trades jumped to 23-day high of 59%
- Key resistance area lies in the range between 1,119 and 1,131
- Consolidation below weekly S1 at 1,108 will raise bearish risks
- Economic events to watch in the next 72 hours: German CPI (Aug); Spanish CPI (Aug); Italian Industrial Output (Jul); US PPI (Aug), Reuters/Michigan Consumer Sentiment Index (Sep) and Monthly Budget Statement (Aug); Eurogroup Meetings; UK Consumer Inflation Expectations; Chinese Industrial Production and Retail Sales (Aug); Japanese Industrial Production and Tertiary Industry Activity (Jul)
While gold firmed near $1,110 an ounce on Friday, the precious metal headed for a third straight weekly decline as investors continue to expect an interest rate hike by the Fed as soon as next week. The US central bank is set to announce its decision on September 17 at the conclusion of its two-day meeting. Even though data showed the US labour market enjoyed a persistent improvement in early September as fewer Americans filed for jobless benefits, weak inflation pressures may complicate the Fed's decision. Besides, worries over slowing growth in China, mixed economic data and turbulence in financial markets have increased uncertainty about the timing of US interest rate increase.
Meanwhile, China has experienced relatively weak inflation over the last year, due to the drop in global fuel prices and slowing domestic activity. However, as fuel prices have been excluded from the annual equation, inflation is starting to tick higher. China's consumer prices' growth quickened in August, driven by the rising cost of pork, whereas the producer prices fell at their fastest pace in nearly six years, sparking China deflation fears. According to the NBS, the CPI measure rose 2% on annual basis, showing the quickest pace in a year. The gauge also beat the market forecast of a 1.9% rise, following the 1.4% growth in July. Pork prices were the main positive contributor to CPI last month, surging 19.6% year-on-year in August.
Upcoming fundamentals: UK CPI expectations as a benchmark for BoE
Britain's consumer inflation expectations from the Bank of England are projected to be released today at 8:30 GMT. This indicator is one of the most important benchmarks used by the regulator in order to set the monetary policy course. Last time the expectations rose from 1.9% to 2.2%, but the outlook has probably deteriorated in the past three months amid uplifted market volatility and low oil prices. Meanwhile, Chinese industrial production and retail sales data for August will be due on Sunday at 5:30 GMT as markets forecast the improvement to be registered for both indicators.
Gold refuses to fall below 1,108
The yellow metal failed to consolidate below the weekly S1 at 1,108 on Thursday and therefore was forced to come back above this important mark. Nonetheless, the bullish development is unlikely in the medium term as long traders are going to face a strong cluster of resistances ahead at 1,119-1,131. On the other hand, we also do not see a significant decline in prices to take place at least until the next week's decision of the Federal Reserve on the key interest rate. Thus, the near term outlook is neutral with respect to gold.Daily chart
Despite a slight rebound yesterday, the precious metal is still hovering below the upper trend-line of the bearish pattern. The closest support to meet is the long term down-trend line around 1,100. In case bears send the price below this mark, we are going to watch the 1,080 area as the next medium term target.
Hourly chart
SWFX sentiment at 23-day high
On the other hand, OANDA share of bulls decreased to 62.11% of all positions, while SAXO Bank traders are keeping 68% of long open trades, no change in the past 24 hours.