Gold prices have initiated a correction from its 7-year highs. Investors seem to have exited their gold positions post Trump’s speech on the ongoing US-Iran dispute.
US-Iran Conflict: Positive Update
On Wednesday, President Trump addressed the media and proclaimed that Iran was “standing down” after attacking the US forces based in Iraq.
The President called the attack on the US troops as retaliation by itself over the death of Iranian commander Qassem Soleimani. Hence, Trump signaled of avoiding a tit-for-tat against the recent attack.
“The fact that we have this great military and equipment, however, does not mean we have to use it. We do not want to use it. American strength, both military and economic, is the best deterrent,” Trump said.
Meantime, the Greenback escaped consolidation as the US-Iran tensions appeared to ease.
Hence, after touching the 96.36 bottom on 31 Dec. 2019, the USD Index upsurged and was trading near 97.40 level at around 12:33 GMT.
On the upside, there is a strong resistance region above 97.50 level, so keep an eye over this upper side barrier.
With this immediate growth in the US Dollar, the gold bears found instant relief, taking control over the pair’s helm.
The gold prices have already started retreating to the downside. Quite notably, it has made a triumphant downward move, breaking the $1553.44 or 38.2% Fibo. retracement level.
On the further downside, the next support target remains stalled near $1535.39 or 50% Fibo. level. Also, I notice a considerable drop in the overall momentum in the XAU/USD pair.
Needless to say, the support conflux comprising of major SMAs continues to remain adamant in the lower side below $1500 level. Hence, this aforementioned SMA conflux might act as a strong encouragement for the gold bulls.
Here, the bears seem to have attained complete control over the pair’s future actions. During the Asian trading session, the XAU/USD pair has moved down, breaking a robust slanting support region.
Anyhow, the bulls seem to have left with some more energy, which they might use for a small retracement. A one-week-old slanting support line might turn out to be the next savior for bulls, preventing more declines.
If the XAU/USD pair happens to retrace to the upper side, then focus on these key resistances –
- $1557.35 or 23.6% Fibo. level
- $1567.70 or 38.2% Fibo. level
- $1576.06 or 50% Fibo. level
However, for any positive move in the near term, the Stochastic Oscillator must generate some sufficient momentum to push the bulls higher. Currently, the oscillator was indicating merely 11 level, which suggests strong oversold positions.