Gold price attempts a dead cat bounce towards $1,800 amid retreating yields. But in the view of FXStreet’s Dhwani Mehta, Thanksgiving Day is unlikely to offer respite to XAU/USD bulls amid a bear flag.

Gold confirmed a bear flag on the 4H chart, impending bear cross lurks

“Gold is attempting a tepid bounce amid a brief pullback in the greenback. The US currency lacks the follow-through upside bias, as investors switch onto the sidelines amid a Thanksgiving Day holiday in the US. Despite the rebound, the risks remain skewed to the downside as the Fed’s hawkishness will continue to underpin the sentiment around the dollar and yields.”

“Growing covid concerns in the European countries could keep the investors unnerved and scurrying for safety in the dollar at gold’s expense. Further, a sustained technical break below the $1,800 threshold continues to keep the sellers motivated.”

“XAU/USD confirmed a bear flag formation on the four-hour chart Wednesday after closing the candlestick below the rising trendline support, then at $1,790. With the bearish technical setup in play, all eyes remain on the pattern target measured at $1,707. Ahead of that, the November 4 low of $1,769 could come to the rescue of gold bulls. The $1,750 psychological level could be the next stop for the bears.”

“The rising trendline support now resistance at $1,794, offers an immediate upside barrier. Acceptance above the latter will enhance the recovery momentum towards the $1,800 level. Further up, powerful resistance around $1,807 will be a nut to crack for gold bulls. At that point, the 200 and 21-SMAs coincide.”

See – Gold Price Forecast: Rising US real yields to increase the downside pressure on XAU/USD – Credit Suisse

Here is what you need to know on Thursday, November 25:

The dollar continued to gather strength against its major rivals following the high-tier data releases from the US and the US Dollar Index came within a touching distance of 97.00 before going into a consolidation on Thursday. The European Central Bank (ECB) will release its Monetary Policy Meeting Accounts, ECB President Christine Lagarde and Bank of England Governor Bailey will be delivering speeches as well. Market conditions are likely to remain thin in the second half of the day due to the Thanksgiving holiday in the US.

The data from the US revealed on Wednesday that the Core Personal Consumption Expenditures (PCE) Price Index climbed to 4.1% on a yearly basis as expected. The FOMC’s November meeting minutes revealed that some policymakers wanted the Fed to be prepared to adjust the pace of reductions in asset purchases to counter persistently high inflation. In the meantime, San Francisco Fed President Mary Daly said that she would support an acceleration of tapering if the economic recovery and the inflation outlook remains unchanged.

The benchmark 10-year US Treasury bond yield continued to climb higher toward 1.7% and Wall Street’s main indexes closed mixed. 

EUR/USD dropped to its lowest level since June 2020 at 1.1185 on Wednesday and clings to modest daily gains in the early European session above 1.1200 on Thursday.

GBP/USD extended its weekly slide toward 1.3300 but managed to stage a modest rebound. Ireland reportedly sees a “window of opportunity” to reach an agreement on Brexit’s Northern Ireland protocol. 

USD/JPY capitalized on rising US Treasury bond yields and renewed multi-year highs near 115.50. The pair was last seen moving sideways around 115.40.

Gold briefly dipped below $1,780 on Thursday pressured by rising US Treasury bond yields. XAU/USD is currently posting recovery gains above $1,790.

USD/CAD, which advanced to its strongest level in nearly two months at 1.2745 earlier in the week, is edging lower toward 1.2650 on recovering crude oil prices on Thursday.

Cryptocurrencies: Bitcoin stays directionless below $60,000 on Thursday and Ethereum consolidates its weekly losses while holding above $4,000.

 

  • WTI fades bounce off intraday low, grinds around weekly top.
  • Easing bearish bias of MACD, 100-DMA challenges sellers.
  • Monthly falling trend line offers extra hurdle for the bulls to tackle.

WTI crude oil prices fade the early Asian gains, easing to $78.23 ahead of Thursday’s European session.

The black gold posted its first daily loss of the week the previous day following its failures to cross the 50-DMA hurdle. Even so, the MACD conditions hint at further challenges for the oil sellers.

Also challenging the oil prices is the latest swing low, also the monthly trough, surrounding $74.65, as well as the 100-DMA level of $74.00.

It’s worth noting that a horizontal area comprising multiple levels marked in September around $72.90 becomes important for WTI sellers to watch for confirmation.

Meanwhile, a daily closing past 50-DMA level of $78.75 will aim for a one-month-old resistance line near $80.50.

Following that the monthly peak near $84.00 and the recently flashed multi-month high around $85.00 will be in focus.

Overall, WTI crude oil prices remain lackluster but the bears seem running out of steam of late.

WTI: Daily chart

Trend: Recovery expected

 

  • XAU/EUR looks to extend the recent rebound from two-week lows.
  • Gold buyers remain hopeful while above the 21-DMA.
  • RSI sits above the midline, supporting the recovery mode in gold.

XAU/EUR is looking to build onto the recovery from two-week lows of $1,582 reached earlier this week.

The spot is currently flirting with the $1,600 threshold despite a minor pullback in the euro, as markets reassess the potential risks emerging out of the European covid curbs.

Looking at it technically, XAU/EUR stalled its four-day losing streak on Wednesday, having found strong support at the ascending 21-Daily Moving Average (DMA), now at $1,592.

A daily closing below the latter is needed to resume the correction from the 14-month top at 1,653.90.

The two-week lows will be retested below the 21-DMA support, opening floors for a drop towards $1,575, November 10 lows.

If the selling momentum accelerates, then the bears will target the upward-sloping 50-DMA at $1,550.

XAU/EUR daily chart

On the upside, Wednesday’s high at $1,612 will offer immediate resistance, above which the $1,650 psychological will draw buyers’ attention.

The 14-day Relative Strength Index (RSI) sits above the midline, suggesting that there is scope for the rebound to gain traction.

Acceptance above $1,650 could trigger a fresh upswing towards the $1,700 threshold.

Cable remains under pressure and could grind lower to the 1.3260 region in the short-term horizon.

Key Quotes

24-hour view: “The sharp drop in GBP to 1.3317 yesterday came as a surprise (we were expecting GBP to trade between 1.3350 and 1.3410). While the rapid drop has room to dip below the major support at 1.3300, a sustained decline below this level is unlikely. The next support is at 1.3260. Resistance is at 1.3365 but only a breach of 1.3385 would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Yesterday (24 Nov, spot at 1.3375), we highlighted that ‘risk is still on the downside but slim chance for GBP to move to 1.3300’. We did not anticipate the subsequent sharp drop to 1.3317. In view of the improved downward momentum, a break of 1.3300 would not be surprising. The next level to focus on below 1.3300 is at 1.3260. Overall, the downside risk is deemed intact as long as GBP does not move above 1.3410 (‘strong resistance’ level was at 1.3445 yesterday).”

  • GBP/USD snaps four-day downtrend to bounce off yearly low.
  • Britain won’t trigger Article 16 until talks collapse, EU’s Sefcovic will visit London for negotiations on Friday.
  • UK experts predict New Year surge in covid cases, virus-led death toll declines.
  • BOE’s Bailey eyed for rate hike clues following the firmer jobs report, inflation and PMI data.

GBP/USD consolidates recent losses around the 11-month low, grinding higher around 1.3350 ahead of Thursday’s London open.

While a pullback in the US dollar could be well-cited for the latest rebound in the cable pair amid a sluggish Asian session, hopes of overcoming the Brexit deadlock also favor the quote of late.

Although the No.10 Downing Street spokesperson cites a substantial gap between the UK and EU views regarding Northern Ireland, the British Prime Minister Boris Johnson’s readiness, per Reuters, to work hard to solve the issue on hand keeps market players optimistic. That said, the British policymakers have also given consent to Irish PM Michael Martin that they won’t trigger Article 16 until the talks collapse.

On the same line were the lines from Bloomberg suggesting the positive progress over the Brexit talks. “Brexit Minister David Frost is pushing for a significant overhaul of the existing treaty, while European Commission Vice-President Maros Sefcovic is offering concessions within the framework of the existing deal.” It’s worth noting that the UK and the Eurozone were discussing relief for medical aids traveling through Northern Ireland and were hopeful of a solution ahead of the UK visit by EU’s Sefcovic, scheduled for Friday.

Also positive for the GBP/USD prices was a pullback in the US Treasury yields following the recently sluggish US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

Alternatively, Sky News quotes British Health Experts to cite a risk of New Year surge in the covid cases after the latest daily infections jump to 43,676 while the death toll eased to 149.

Amid these plays, stock futures are mildly bid tracking the previous day’s first negative daily close in three by the US 10-year Treasury yields. While the same pull the US Dollar Index (DXY) back from a 16-month high, the GBP/USD pair’s further rebound depends upon comments from Bank of England (BOE) Governor Andrew Bailey amid Thanksgiving Day Holiday.

Considering the latest improvement in the UK jobs and inflation data, not to forget firmer preliminary readings of November PMIs, BOE’s Bailey might reiterate his bullish bias for the rate hike and can help the GBP/USD to extend the corrective pullback. However, covid woes may challenge the policymakers, which in turn can drag the quote ahead of tomorrow’s key Brexit talks.

Technical analysis

Given the cable pair’s failures to rebound following the downside break of the September 2020 high, coupled with the bearish MACD signals, sellers are likely to keep the reins. However, a convergence of the 100-week SMA and a descending trend line from late July, around 1.3290-75 appears a major challenge for the pair bears. Meanwhile, corrective pullback remains elusive until crossing September 2020 top of 1.3482.

 

Quek Ser Leang at UOB Group’s Global Economics & Markets Research comments on the recent price action around the US Dollar Index (DXY).

Key Quotes

“Two weeks ago, USD Index surged above the Sep’s high of 94.74. This level is also near the top of the weekly Ichimoku cloud and the breach of this key technical level resulted in a sharp and swift rally (note that this is the first time USD Index is above the Ichimoku cloud since Jun last year). Weekly ADX has risen above the 25 level which indicates that the current rally is in a ‘trending’ mode. In other words, USD Index could continue to advance at a rapid clip.”

“The next resistance level of note is at 97.80, the high in Jun 2020. This level is also near to the 61.8% retracement of the multi-month decline from last March (high of 102.99) to the low of 89.21 in Jan this year.  On the downside, the previous resistance at 94.74 is acting as solid support now but only an unlikely break of the 55-week exponential moving average would indicate that USD Index is not ready to trend upwards in the months ahead.”