USD dollar weakening and high equity volatility continue to support gold, which during yesterday's trading tested an important psychological mark around 1300.
On Thursday, US dollar lost a significant part of its position after the publication of a weak economic activity report in the manufacturing sector. Experts predicted a decline from 59.3 to 57.7 points, but the actual figure was only 54.1 points. That disappointed markets as any US economic statistic is eyed. Besides this is the lowest level since December 2016. Future policy of US regulator will directly depend on the compliance of the published statistics with the predicted values. Accordingly, weaker data leads to lower expectations regarding the rate in 2019. And this is highly negative driver for USD dollar. According to the CME Group, on Thursday, the probability of maintaining the current level of rates throughout 2019 was estimated at 66%, the probability of lower rates was estimated at 34%, while expectations regarding a possible increase in rates this year are very small.
Another major support factor for gold is the sharply increased demand for safe assets amid high volatility and uncertainty in global equities. White House economist Kevin Hassett warned yesterday that other US companies could join Apple in negative outlooks and lower their forecasts for sales and revenues due to slower economic growth in China. According to him, almost all US companies that work with China face similar problems. Amid this background, the topic of trade negotiations between United States and China, which, according to Bloomberg News, should resume on Monday, is becoming relevant again on the market. Many experts note that amid sharply increased volatility in equities and signs of a slowdown in the US economy, the White House negotiators may somewhat soften the position to reach the agreement. We will see how the situation will develop further.
Today, the focus of investors will be upon the report on the US labor market. This report can have a very strong impact on the market. Yesterday many experts registered pretty strong ADP report, which generally suggests the possibility of publishing stronger data from the Ministry of Commerce. It is also worth paying attention today to the speech of the Fed Chairman Jerome Powell, which will begin some time after the start of the American trading session.
The chart maintains a fairly stable bullish trend and the absence of any signals to reverse the current price movement, but this does not mean that such signals can not occur in the future. Now the price is testing the an important and very strong resistance level around 1300 where we can see the formation of a rolling movement with targets around 1280. Accordingly, it will be possible to rely on the continuation of the current movement dynamics only after the price consolidates above 1300.00.
Resistance Levels: 1300 1310, 1315;
Support levels: 1290, 1282, 1270.
The main scenario is the formation of a reversal formation in the range of 1300.00-1305.00.
An alternative scenario - consolidation above 1305.00 and the continuation of the bullish trend.
Gold technical picture is still dominated by signals indicating a continuation of the bullish uptrend, but the level of 1300.00 and important economic news as well as the Friday session can change the situation on the market, so today it is best to stay out from active trading with this instrument.