Gold prices closed higher in yesterday’s trading as negative US data and Trump’s impeachment dampened demand for the US dollar. After XAUUSD opened at $1475.24, it traded lower to bottom at $1,472.90. However, the precious metal found enough bids to tap a new intra-week high at $1,481.41. It finished the day at $1,478.60.
Political Uncertainty Weighs Down Market Sentiment?
On Tuesday, the US House of Representatives voted to impeach US President Donald Trump. While analysts say that it is unlikely for him to lose his position in the White House, this development still poses the risk of political uncertainty. It never sits well with market participants which could be why demand for the safe haven picked up yesterday.
Everyone will be looking forward to the Senate hearings which will take place in January 2020.
Negative US Data Weakens the US Dollar
It also helped gold that data from the US came in worse than expected yesterday.
First, the Philly Fed Manufacturing Index came in much lower at 0.3 versus the 8.1 forecast for December. This was bearish for the dollar because it highlights weakness in the manufacturing sector. Second, the unemployment claims report was at 234,000 versus the 225,000 forecast. Lastly, existing home sales for November showed that only 5.35 million homes were sold,lower than the 5.44 million forecast.
Read our Best Trading Ideas for 2020.
Gold Price Outlook
On the 4-hour time frame, we can see that gold prices are testing resistance around $1,480.00. XAUUSD has been unable to sustain gains above this price since the beginning of this month. Meanwhile, it has been making higher lows. Connecting the most recent highs and lows on XAUUSD actually forms an ascending triangle.
In forex trading, this chart pattern is considered as a bullish indicator. A strong close above yesterday’s high at $1,481.41 could mean that gold prices may soon rally to $1,490.69. This is where the 100 SMA on the daily time frame seems to be.
On the other hand, if the dollar recoups some of its losses, XAUUSD could fall. Watch out for the area around $1,470.00. This price seems to coincide nicely with the rising trend line as well as the 100 SMA and 200 SMA on the 4-hour time frame.
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