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Gold clings to gains above $1280 despite USD recovery

  • US Dollar Index rebounds above mid-96 area.
  • European stocks slide on Wednesday.
  • US 10-year T-bond yields continue to edge lower.

The XAU/USD pair started the new year on a strong note and touched its highest level since June of 2018 near $1289 but failed to preserve its momentum. Nevertheless, the pair was last seen trading at $1286, still up nearly $6, or 0.45%, on a daily basis.

The risk-off mood, which allows the precious metal to gather strength, that dominates the markets on the first official trading day of 2019 seems to be the primary driver of the pair's price action. The Eurostoxx 50 and the UK's FTSE 100 both lose around 0.7% in the session to reflect the weak risk-appetite while the 10-year U.S. T-bond yield continues to push lower amid higher demand for safer T-bonds. 

On the other hand, a decisive recovery witnessed in the US Dollar Index points to a broadly stronger greenback, which makes it difficult for the pair to extend higher. Ahead of the Manufacturing PMI from the United States, the DXY is up 0.5% on the day a 96.56.

Technical levels to consider

With a decisive break above $1289 (daily high), the pair could target $1300 (psychological level) ahead of $1309 (Jun. 14, 2018, high). On the downside, supports are located at $1278 (daily low), $1268 (Dec. 27, 2018, low) and $1264 (Dec. 26, 2018, low). Meanwhile, the CCI indicator on the daily chart has recently moved above the 100 mark, suggesting that the bullish momentum is still strong in the near-term.

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