Gold prices rose further last week, boosted by the unrelenting decline in the dollar. Without any major risk events on the horizon, we think that the yellow metal’s price could continue to be dictated by the performance of the greenback over the next days. Given the latest turmoil in the White House and the subdued market expectations for another Fed rate hike this year, we think that the US currency could remain under pressure for a while. Something like that could keep the yellow metal supported.

XAU/USD continued edging north last week, but traded in a consolidative manner yesterday between the support of 1265 (S1) and the resistance of 1271 (R1). The price structure on the 4-hour chart remains higher peaks and higher troughs within the upside channel that has been containing the price action since the 10th of July. Hence, we consider the short-term outlook to still be positive. A clear break above 1271 (R1) would confirm a forthcoming higher high and perhaps set the stage for extensions towards our next resistance of 1280 (R2).

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Nevertheless, taking a look at our short-term momentum indicators, we stay mindful that a corrective setback may be looming before the next leg north. The RSI turned down after it hit resistance near its 70 line, while the MACD, although positive, has topped and fallen below its trigger line. What’s more, there is negative divergence between both these indicators and the price action.

As for the broader outlook, the metal continues to trade in the sideways range that’s been in place since the end of January, between the 1200 and 1300 key barriers. The latest short-term uptrend began from near the lower bound of that range. As such, this increases the likelihood for further near-term advances, perhaps for a test near the upper bound of the range, at 1300.

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