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XAU/USD – Downside favoured amid risk-on, could test $ 1090 – key support

Markets were caught off-guard after the ECB turned out outrightly dovish, the ECB Chief Draghi citing reconsideration of the policy measures at its March policy meeting. Traders sold-off the EUR across the board on the back of Draghi’s jawboning, with the EUR/USD losing over 100-pips post-decision. This triggered an extensive USD rally and therefore, knocked the bullion (XAU/USD) to 1092.45 lows, before recovering some ground to close the day at 1100.72. Later in the NY session, gold found some support from a weak set of US economic data, as both the weekly claims and Philly Fed manufacturing gauge disappointed markets. However, the prices remained capped below the 100-DMA barrier then placed at 1105.68 and hence, the yellow metal remains exposed to more downside risks.

Currently, the yellow metal trades in the red around 1097 levels, falling once again to resist 1100 barrier. The prices came under renewed selling pressure this session as risk-on moods dominated in full swing as the global equities rallied on increasing stimulus talks from the ECB as well as the BOJ. The greenback benefited the most amid bettering risk conditions, with the US dollar index climbing 0.30% to 99.45. Therefore, amid diminishing demand for safe-havens and a broadly higher US dollar, the precious metal is likely to remain pressured in the day ahead. Moreover, the extension of the rebound in oil prices eased the recent market unrest somewhat and could drive the yellow metal further away from weekly tops.

Technicals – Improving risk-appetite could push gold towards $ 1090

The hourly chart presents a bearish picture for today, with the RSI pointing sharply lower and looks a distance away from oversold territory. Therefore, suggesting more room for declines going forward. To the downside, the immediate support is seen at the upward sloping 100-SMA located 1094.20, below which the horizontal support of 200-SMA at 1090.90 is likely to act as a major support. However, a failure to breach the 100-SMA support, the prices could revert to 1100 levels (psychological levels/ 50-SMA). A break above which opens doors to 100-DMA at 1105.12. However, upside seems limited unless the pair closes above 100-DMA.

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