Gold jumps as China passes controversial Hong Kong law
The price of gold rose by almost a percentage point as investors started to worry about the rising tensions between the United States and China. This is after the Chinese parliament passed the controversial Hong Kong security law. In a statement yesterday, Secretary of State, Mike Pompeo, said that the special bilateral relationship between Hong Kong was no more because the city was no longer autonomous from China. China has warned the US of consequences if it continues with its rhetoric. These tensions come at a time when the US is also blaming China for not alerting the world early enough about the coronavirus.
The euro was little changed today as the market reacted to mixed economic data from Europe. In Italy, data showed that business confidence weakened to 71.2 in April as the country attempted to reopen the economy. In the eurozone, a survey by the Economic and Financial Affairs office showed that the industrial and services sentiment fell to -27.5 and -43.6 respectively this month. These numbers were worse from the previous -32.5 and -38.6, respectively. In the same month, consumer confidence made a modest improvement from the previous -22.0 to -18.8. These numbers came a day after the European Commission unveiled an $826 billion recovery fund.
The US dollar was little changed as investors reacted to a slew of economic data from the US. More than 2.1 million Americans filed for unemployment benefits in the past week. That brought the total number of people who have filed for the claims in the past two months to more than 40 million. The second reading of Q1 GDP data showed that the US economy contracted by 5%, which was slightly higher than previous estimate. Other data showed that real consumer spending in the first quarter declined by 6.8%. Meanwhile, the durable goods data declined by 17.2% while the core durable goods data dropped by 7.2%.
The XAU/USD pair rose to an intraday high of 1725, which is slightly below the YTD high of 1765. On the daily chart, the price is above the 100-day and 50-day exponential moving averages. The RSI remains below the overbought level of 70 and the price is still above the Ichimoku cloud. Therefore, the pair may continue rallying as interest rates remain at extremely low levels and as global risks rise.
The EUR/USD pair found a significant resistance after yesterday’s rally. The price is now trading at 1.1000, which is an important psychologically level. It is also slightly above the 50-day and 100-day exponential moving averages. It is also between the 38.2% and 50% Fibonacci retracement level. Therefore, the pair may continue rallying as bulls target the 50% retracement at 1.1066.
The EUR/GBP was barely moved after the significant rally yesterday. The pair is trading at 0.8978, which is a few pips below last week’s high of 0.9000. The price is also slightly below the 61.8% Fibonacci retracement level. The RSI is also slightly below the overbought level of 70. The pair may continue rallying as bulls attempt to test the 61.8% retracement level of 0.9013.