Source: PaxForex Premium Analytics Portal, Fundamental Insight
Following Friday’s massive sell-off in equity markets, forcing the Dow Jones down by almost 1,000 points, capital flight sent asset prices tumbling, including gold. With a light economic calendar to start the new trading week, traders should brace for more selling, especially if the German IFO data disappoints. The German IFO Business Climate Index for April is predicted at 89.1, the German IFO Current Assessment Index at 95.8, and the German IFO Expectations Index at 83.5. Forex traders can compare this to the German IFO Business Climate Index for March, reported at 90.8, the German IFO Current Assessment Index at 97.0, and the German IFO Expectations Index at 85.1.
UK economic data disappointed Friday, sending the British Pound into a tailspin, shedding more than 200 pips. Eurozone PMI data for April was mixed with a bullish bias, as manufacturing contracted less than economists anticipated, and the services sectors expanded. France clocked in above expectations with a broad-based expansion over March. It helped the ailing Euro recover from multi-month lows, but the overall sentiment remains bearish as German manufacturing underperformed. The Euro could rally following incumbent French President Macro’s victory, making him the first French president to win a second term in over two decades.
US PMI data for April disappointed, adding to selling pressure across risk assets. Inflation may have peaked, but it is likely to remain elevated for several quarters and well into 2023. Gold could temporarily drift lower as it approaches the 1,900 level, but given the bear market in many sectors, it continues to offer an attractive buying opportunity. Fundamentals support a renewed push to a breakout above the 2,000 level from where it could set new all-time highs while the global economy flits with a recession. Another bullish catalyst for gold is the rising stagflationary environment in the US, which could depress the US Dollar despite the rising interest rate environment.
The forecast for the XAU/USD remains bullish after its psychological resistance level of 2,000 rejected this safe-haven asset. It corrected into its moderately ascending Ichimoku Kinko Hyo Cloud and is challenging its Senkou Span B. Volatility may increase as the Kijun-sen flatlined while the Tenkan-sen began to descend. Traders should monitor the CCI after its breakdown from extreme overbought territory into extreme oversold conditions. This technical indicator may temporarily move lower before reversing as bulls and bears fight for control. Can bulls regain the upper hand and push the XAU/USD into its horizontal resistance area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for XAU/USD remain inside the or breakout above the 1,901.10 to 1,944.10 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,922.50
- Take Profit Zone: 2,050.00 – 2,070.00
- Stop Loss Level: 1,890.00
Should price action for XAU/USD breakdown below 1,901.10, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,890.00
- Take Profit Zone: 1,815.00 – 1,829.65
- Stop Loss Level: 1,901.10
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