XAUUSD Trading Strategy | Support and Resistance Levels

 Yesterday, the XAUUSD pair traded within a range below the $2,400 mark, retesting the key support level at $2,385. Traders should wait for a robust support formation at this level to consider long positions. Conversely, if the price drops below $2,385, it could signal an opportunity for short trades.

US Dollar Index Performance and Market Factors

Over the past six weeks, the US dollar index has shown exceptional strength. This performance has been driven by several factors:

Dovish ECB Rhetoric: The European Central Bank's dovish stance has weakened the euro, boosting the US dollar.

Global Risk Appetite: A deterioration in global risk appetite has led investors to seek the safety of the US dollar.

Trump Trade Impact: The market dynamics influenced by former President Donald Trump's trade policies have also supported the dollar's strength.

Political Uncertainty and Market Volatility

The recent announcement by Joe Biden that he will no longer pursue the presidency introduces an unpredictable variable into the markets. This political development is likely to contribute to heightened volatility, affecting currency and commodity prices.

ECB's Hawkish Rhetoric and Economic Recovery

On the other hand, hawkish rhetoric from ECB officials and the recovery of European business activity could support the XAUUSD pair. Additionally, the deceleration of the US Personal Consumption Expenditures (PCE) index suggests a potential cooling of inflation, which may influence the Federal Reserve's monetary policy decisions.

Market Outlook

Traders should closely monitor these developments:

Support Formation: Look for strong support to form around $2,385 for potential long trades.

Short Opportunities: Consider short positions if XAUUSD falls below $2,385.

US Dollar Index Trends: Keep an eye on the performance of the US dollar index as it reacts to global economic and political shifts.

ECB and US Economic Indicators: Watch for further ECB statements and US economic data releases, which could impact market sentiment and the XAUUSD pair.