Gold once again drops below 200-DMA after ISM PMI data

Gold once again drops below 200-DMA after ISM PMI data

3 July 2017, 17:18
Roman Vashchilin

Although the XAU/USD pair was able to make a modest recovery to $1228 in the early NA session, it faced another selling pressure after the better-than-expected ISM PMI data. At the moment, the pair is trading at $1224, losing 1.4%, or $17, on the day.

Earlier in the day, the precious metal was sold aggressively against currencies as the global equity indexes had a strong to the week. Hurt by the rising risk appetite, the demand for the safe-haven gold remained weak. As of writing, the Dow Jones Industrial Average is gaining 0.83% while the S&P 500 is up 0.55%.

  • US stocks rally during early trade

On the other hand, following Friday's recovery, the US Dollar Index continued its march north on Monday. Although the Markit Manufacturing PMI data came in below expectations from the U.S., the ISM Manufacturing PMI data painted a more optimistic picture. Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management said: "Comments from the panel generally reflect expanding business conditions; with new orders, production, employment, backlog, and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace."

  • US: Manufacturers reported a disappointing end to the second quarter - Markit
  • US: Economic activity in the manufacturing sector expanded in June - ISM

The US Dollar Index, which started the day at 95.38, is now at 95.90, up 0.52% on the day. There are no more data left in the economic calendar in the remainder of the session and we may see the trading volume thin out as investors get ready for tomorrow's Independence Day holiday.

Technical outlook

A daily close below the 200-DMA could allow the pair to drop further. However, the RSI on the daily graph already reached the oversold region below the 30 mark and we may see a short-term technical correction before the next leg down. $1214 (May 9 low) could be seen as the first support ahead of $1200 (psychological level) and $1195 (Mar. 10 low). On the upside, resistances align at $1227 (200-DMA), $1242 (daily high) and $1251 (20-DMA). 

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