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Fundamentals

In Tuesday's (August 1st) Asian session, spot gold oscillated upward, and it is currently trading at 1960. Overnight, the inflation in the Eurozone cooled, and the market further bets on the ending of the rate hike cycle, once boosting the precious metal price to 1972. At present, the market is generally expected that the Fed is not likely to raise interest rates again in the September meeting. Nonetheless, in the FOMC meeting last night, the Fed members, doves, senior Fed officials, and Chicago Fed President Goolsbee did not openly and clearly support the suspension of interest rate hikes in September. All these keep the USD strong, and the USD continues to appreciate in the early morning, once stood above 102 again, and suppressed the gold. Now, gold is still trading at the peak of inflation, while the USD pattern is following the ending of the rate hike. But recently, the USD rose abnormally higher, adding resistance to gold. Under such a paradoxical logic, investors need to pay attention to the market's cognition.

Data: The July CPI (seasonally adjusted) in the Eurozone slowed to 5.3% YoY, and the core inflation is still stubborn. By excluding volatile food and energy, the July CPI (seasonally adjusted) in the Eurozone rose 5.5% YoY, higher than the expected 5.4%, and unchanged from the previous value of 5.5%. Besides, Eurozone GDP rose 0.3% QoQ surprisingly, which reversed the negative growth from the first quarter.

Today's focus: Japan's unemployment rate of June, the Eurozone Markit manufacturing PMI final value of July, the UK Markit manufacturing PMI final value of July, the Eurozone's unemployment rate of June, and the U.S. Markit manufacturing PMI final value of July.  

Technical Analysis

Daily chart: Gold did not follow the depreciation in last Friday during the last trading session of July but rebounded significantly. The lowest level was 1950 and the highest one was 1972, a space for 22 USD. Gold turned stronger but the continuation was poor in the past days, with constant trends in appreciation and depreciation. Thus, investors will suffer if chasing the growth and the decline pattern. If investors can wait for the rebound or a sufficient retracement, they can take profits. Currently, gold showed a great retracement space after rising to 1972 at midnight on Monday, and it dropped for 3 consecutive sessions from high in the 4H chart, there will be further descending space (considering the trend on Tuesday without looking at the appreciation on Monday). Now, gold is running in the channel (shown below) and the highs for rebound are lowering. It is recommended to keep an eye on the 1966 above and the 1940 below. Today, investors should focus on the area below 1955  shortly. If gold falls below it, the abnormal growth in the U.S. and European sessions will be invalid and gold will be trapped in a weak pattern.

Trading recommendations: Buy lows and sell highs in the range. The gold pattern followed our expectation yesterday with its low at 1950. It was mentioned that if gold was retraced to 1950, investors should go long with small positions or take profits completely. The pity is the unexpected rebound above. If gold rebounds to 1966 today, investors could go short soon, and raise the positions if it reaches 1970. The stop loss should be set at 1972 and investors should take profits at 1952. Furthermore, investors need to move the stop loss to breakeven later and focus on 1940. If gold retrace to 1952 today, aggressive investors should go long shortly, set the stop loss and 1948 strictly, and move the target to 1966 for taking profits.  

Trading Recommendations

Trading direction: long

Entry price: 1953

Target price: 1966

Stop loss: 1950

Support: 1952.000/1940.000

Resistance: 1966.000/1972.000