Gold recovery loses momentum on USD strength, drops below $1245

Although the XAU/USD pair was able to take advantage of the USD sell-off in the early NA session, it came under a renewed selling pressure as the greenback gathered strength. As of writing, the pair is trading at $1243, losing 1.1%, or nearly $14, on the day.

• US: Chicago Fed National Activity Index was –0.26 in May, down from +0.57 in April
• US: New orders for manufactured durable goods in May decreased $2.5 billion

In the early trading hours of the European session, the pair lost more than $17 in a matter of minutes and struggled to recover these losses in the remainder of the day. Although there was no fundamental trigger behind that move, the market chatter suggested that a liquidation of a large $2 billion position had been the primary reason. 

On the other hand, following the initial drop below the 97 handle on dismal macroeconomic data from the United States, with a steady rise, the US Dollar Index refreshed its session high at 97.16, limiting the recovery gains of the pair. Moreover, major equity indexes continue to float in the positive territory, making it even more difficult for the traditional safe-haven precious metal to find any market interest.

Technical outlook

The CCI on the daily graph reached the -100 mark, suggesting that the bearish momentum is strong in the short-term. The lower arm of the Bollinger Band on the same graph aligns as the initial support at $1234 ahead of $1228 (200-DMA) and $1218 (May 10 low). On the upside, resistances could be seen at $1255 (50-DMA), $1262 (20-DMA) and $1270 (Jun. 12 high).