Gold Edges Higher as Dollar Rally Takes a Pause

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Gold bulls were in the driving seat on Monday as investors struggled to shake off jitters over plateauing global economic growth and lingering trade tensions.

A softening Dollar boosted appetite for the yellow metal with prices trading marginally above $1240 as of writing. With the Dollar seen weakening ahead of the Federal Reserve meeting and risk aversion magnetizing investors to safe-haven assets, Gold has the potential to appreciate further in the near term. Technical traders will be closely observing how prices behave around the $1240 resistance level. A solid breakout above this point is seen opening a path towards $1250.70 and $1258 – a level that resides just below the 200 Daily Simple Moving Average. In an alternative perspective, repeated weakness below $1240 will be good news for bears and should encourage a decline back towards $1228.00.

Dollar weakens despite market caution

The Dollar is struggling to find support from the market caution is investors remain on the side-lines ahead of the Federal Reserve policy meeting.

With a rate hike in December already heavily priced in, investors will most likely direct their attention towards the policy statement and press conference for clues on rate timings in 2019. It must be kept in mind that dovish comments from Fed officials and soft economic data have clouded the Dollar’s outlook for 2019. Buying sentiment towards the Dollar is seen diminishing further if the Fed meeting moves along with a dovish rate hike. Although the Dollar Index is trading near 2018 highs, it does feel like bulls are living on borrowed time. A breakdown below 97.00 could trigger a decline back towards 96.50.

Pound buoyed by Dollar weakness…

No major news about Brexit is good news as the Pound is concerned and this was reflected the currency’s prices action this afternoon.

The Pound is drifting higher amid the absence of Brexit newsflow while Dollar weakness continues to complement upside gains. Although the GBPUSD has the potential to edge higher in the near term, bears remain in firm control below the 1.2700 resistance level. Sustained weakness below this point is seen opening a path back towards 1.2500. The Pound is seen drifting within this wide range ahead of the Bank of England policy meeting on Thursday.

USDJPY sinks on risk-off sentiment

Investor sentiment has been hammered by renewed fears over slowing global growth and geopolitical risk factors.

The Japanese Yen is set to appreciate further in the near term as investors scatter away from riskier assets to seek safe-haven investments. With the Dollar likely to remain depressed ahead of the Fed meeting, the USDJPY remains in the hands of bears and is seen sinking further. Focusing on the technical picture, the USDJPY remains in a very wide range on the daily charts. A breakdown below 113.00 could encourage a move back towards 112.40.

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Lukman Otunuga

Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets. Lukman provides in-depth analysis on the global currency and commodity markets and is often quoted by leading international media outlets such as: MarketWatch, CNBC, NASDAQ, Reuters, AFP, The Guardian and Yahoo. Prior to joining FXTM, Lukman spent two years as a research analyst with international currency broker FXCM, where he focused on a technical and fundamental analysis of the global currency, commodity, and stock markets. Lukman was also responsible for leading educational seminars for international and local high net worth individuals, and has published a series of educational articles on forex trading with City A.M. Lukman holds a BSc (hons) degree in Economics from the University of Essex, UK and an MSc in Finance from London School of Business and Finance, where he studied corporate finance, mergers & acquisitions and the role of international financial institutions