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XAU/USD turns bearish in the near term, holds above $2,000 USD

  • Wall Street trades with a softer tone after reaching record highs on Monday.
  • Market participants await US first-tier data and central banks’ announcements.
  • XAU/USD holds ground but bears gain confidence amid broad US Dollar strength.

Gold keeps trading in a well-limited range on Tuesday, with XAU/USD changing hands just above $2,020 a troy ounce. The bright metal surged throughout the first half of the day as market players dropped the US Dollar following fresh record highs on Monday in the S&P 500 and the Dow Jones Industrial Average. Wall Street rallied on hopes the Federal Reserve (Fed) will soon start trimming interest rates after pushing them to multi-decade highs in the pandemic aftermath. Furthermore, signs that the United States (US) economy could dodge a recession provide impetus to high-yielding equities.

The USD gathered momentum ahead of the American opening, as equities could not maintain their positive tone. US indexes trade with modest losses as speculative interest paused ahead of earnings reports. The season has kick-started with optimism, as so far, companies have reported above-expected profits. Still, upcoming releases alongside macroeconomic events scheduled for the second half of the week triggered the ongoing pause.

Data-wise, US figures fell short of market expectations. The Richmond Fed Manufacturing Index printed at -15 in January, much worse than the -7 expected or the previous -11. Attention on Wednesday will be on the Bank of Canada (BoC), which will announce its decision on monetary policy ahead of the US opening.

XAU/USD short-term technical outlook

XAU/USD trades range bound, lacking clear directional strength, although the latest test of the $2,000 area showed buyers are willing to defend the level. The daily chart shows the pair retreated sharply after nearing a bearish 20 Simple Moving Average (SMA) at around $2,040.30. The longer moving averages remain below the current level, lacking directional strength. Finally, technical indicators ticked higher but remain within negative levels without enough strength to suggest a firmer recovery.

In the near term, and according to the 4-hour chart, the risk skews to the downside. XAU/USD struggles around a mildly bullish 20 SMA while the longer ones gain downward traction above it. Finally, technical indicators are crossing their midlines into negative territory, but still not enough to confirm another leg south.

Support levels: 2,016.40 2,001.60 1,988.60

Resistance levels: 2,033.10 2,040.30 2,052.70

Source: Fxstreet