Gold, XAU/USD, Dow Jones, ECB, Rising Wedge – Asia Pacific Market Open

  • Gold and: Dow Jones sink after killing Europe’s central banks
  • The most notable was the ECB, which was surprised by the hawks
  • XAU/USD breaks below the Rising Wedge, hinting at reversal risk

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Asia-Pacific market briefing. Gold, Dow Jones Sink As Central Banks In Europe

Gold prices fell by 1.7 percent on Thursday, registering the worst one-day performance in the last 3 months. The anti-fiat yellow metal came under pressure during a busy 24 hours of central bank rate decisions during the European trading session. These included the Swiss National Bank, the Bank of England and the European Central Bank. This also followed the Federal Reserve on Wednesday increased rates.

The SNB, BoE and ECB raised interest rates to continue the fight against the highest inflation in decades despite growing concerns about the state of global growth. The most notable of the three was the ECB, which surprised markets with a much more aggressive stance than expected. The central bank said interest rates “should rise significantly at a sustained pace” as it revised its inflation forecasts.

In just 24 hours, markets added more than 30 basis points, a year after the expected tightening from the ECB. This did not bode well for the anti-fiat yellow metal, which has been pressured by central banks this year by raising interest rates and raising government bond yields. A dovish ECB has also stoked risk aversion, sending equity markets tumbling. On Wall Street, the Dow Jones fell by 2.35%. This boosted demand for the safe-haven US dollar, which further pressured gold.

Central banks are growing in Europe and fueling risk aversion

A chart created in TradingView

Friday’s Asia-Pacific trading session

Friday’s Asia-Pacific trading session is devoid of significant economic event risk. It puts traders’ focus on overall risk appetite. Poor stock market performance during the Wall Street session left the Nikkei 225, ASX 200 and Hang Seng indices vulnerable. If this increases demand for the US dollar as traders seek shelter, then gold could extend its decline.

Technical analysis of gold

On the daily chart, gold prices have broken into a bearish bullish wedge chart. This puts XAU/USD at risk, especially if prices find bearish confirmation. This also follows a negative RSI divergence which indicated that the upward momentum is fading. Clearing the immediate support, which is the 23.6% Fibonacci retracement level at 1775, reveals the 50-day simple moving average. The latter may restore short-term upside focus.

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XAU/USD Daily Chart

XAU/USD Daily Chart

A chart created in TradingView

— Written by Daniel Dubrowski, Senior Strategist at DailyFX.com

To connect with Daniel, follow him on Twitter:@ddubrovskyFX



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