The US dollar continues to weaken and has moved into a significant position on the DXY index where it is either about to run higher from a double bottom, consolidate or continue lower. The last Fed Open Market Committee of the year comes nearer and markets are positioning for a dovish outcome which is likely hurting on the dollar.
Analysts at Westpac have said ”Tweaks to the pace and composition of purchases (shifting to more long-end purchases) and strengthening QE guidance (linking it to recovery progress) the odds on favourites for any material Fed changes,”.
For the meantime, the US dollar could find some comfort on any continued uncertainty in the Brexit negotiations as well as Congressional efforts in sealing a Covid-19 relief fund. There would be a huge demand for safe-haven US dollars if there were any threats to a vaccine-led global recovery which is by far the most crucial dynamic for 2021.
Gold is now trading at $1,856, up from 1.59% on the day having travelled between a low of $1,825 and $1,858.
On a technical perspective, the metal did not respect the bearish head and shoulders, gapping through the 21 period moving average and invalidating any near-term bearish bets.
From a daily and weekly perspective, the bulls are still not prevalent yet, not until we see the weekly candle close above $1,850.
Even though the recent pullback, we remain neutral on the yellow metal expecting to trade between 1875 and 1825.
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