Gold is trapped between key levels: European open – 11/09/2023

Asian Indices:

• Australia's ASX 200 index rose by 6.1 points (0.09%) and currently trades at 7,162.80
• Japan's Nikkei 225 index has fallen by -94.72 points (-0.31%) and currently trades at 32,506.90
• Hong Kong's Hang Seng index has fallen by -296.3 points (-1.63%) and currently trades at 17,905.77
• China's A50 Index has risen by 35 points (0.28%) and currently trades at 12,601.75

UK and Europe:

• UK's FTSE 100 futures are currently up 8.5 points (0.11%), the cash market is currently estimated to open at 7,486.69
• Euro STOXX 50 futures are currently down -2 points (-0.05%), the cash market is currently estimated to open at 4,235.19
• Germany's DAX futures are currently down -8 points (-0.05%), the cash market is currently estimated to open at 15,732.30

US Futures:

• DJI futures are currently down -1 points (0%)
• S&P 500 futures are currently up 3 points (0.07%)
• Nasdaq 100 futures are currently up 22.25 points (0.15%)

• USD/JPY is on track for a bearish engulfing day following its weekend gap lower
• Comments from BOJ’s governor over the weekend suggested that the central bank is laying the groundworks for hiking rates, which saw the yen strengthen and weigh on USD/JPY at the open
• We also noted that large speculators increased their gross-long exposure to JPY futures by 50% as of last Tuesday, and today’s price action suggests more bullish positions will be placed
• The FTSE 100 rose for a second day on Friday to suggest an important swing low formed on Wednesday. However, the 50-day EMA capped as resistance and the 100 and 200-day EMAs are around 0.75% above current prices, making 7530-40 a likely resistance level
• EUR/USD has drifted higher in line with the near-term bullish bias outlined in the Asian open report. As the week develops I am looking for evidence of a swing high to form, perhaps around or beneath the 1.0766 low.
• GBP/USD has managed to climb back above its 200-day EMA during Asian trade, after forming an inverted hammer day on Friday (to hint it is trying to carve out a swing low)

Events in focus (GMT+1):

• 07:00 – Japan’s machine tool orders, M2 money stock
• 09:00 – China’s loan growth, total social financing, M2 money stock
• 16:00 – Consumer inflation expectations

Gold technical analysis (daily chart):

Spot gold prices pulled back from the August high and fell just under 2, in line with my near-term bearish bias. Gold has since found support around its 200-day average, an important technical level which is not an easy one to crack. But we’re also seeing the US dollar pull back which is helping to support gold against the US dollar. Gold prices remain elevated against other forex majors which shows that XAU/USD has pulled back due to US dollar strength.

Yet it is debatable as to whether gold prices can truly rally from here, with a key US inflation report looming and the 50 and 100-day EMAs capping as resistance. With expectations for CPI to rise, the contrarian within me is wondering if US inflation will undershoot and weigh further on the US dollar, helping to support gold prices later in the week.

Gold technical analysis (1-hour chart):

The 1-hour chart shows that gold prices formed a higher low around the 200-day MA and have moved higher in today’s Asian session. With the weekly and monthly pivot points and 50/100-day EMAs overhead, bulls may want to only seek dips towards the support zone to increase the potential reward to risk ratio. Alternatively, bears may ant to fade into rallies that push gold into such resistance areas on the assumption that price action will remain choppy on the daily timeframe, heading into Wednesday’s US inflation report.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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