FxWirePro: Gold downside capped by 10-day MA, good to buy on dips

Gold has halted its 2 week of winning streak and declined more than $20. The yellow metal jumped more $50 in month of Jan on account of dovish Fed and global uncertainty.

The major three factors that drive gold prices

 US dollar Index: neutral. DXY is trading higher for 4th consecutive day and has broken 20-day MA at 95.87. The index has taken support near 300- day EMA and jumped more than 70 pips from the low.Any break below 94.98 (300- day EMA) confirms bearish continuation and a dip till 93.80 is possible.(negative for gold).

USD/JPY: Strong  USD/JPY has recovered sharply more than 150 pips from low of 108.49 and jumped slightly above 110. The pair’s near term resistance is around 110 and any convincing break above targets 111/112.It is currently trading around 109.60.Slightly negative for gold.

 US 10 year yield : US 10 year yield has halted its down trend and jumped more than 3% from low of 2.616%.The yield has been trading weak for past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.71%.Slightly negative for Gold.

 US 2 year yield: It is trading around 2.538%. The spread between US 10 year and 2 year has declined to 17bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 2 year yield trading above US 5 year yield).

Gold technical

On the higher side, yellow metal is facing resistance around $1335 and break above will take the gold to next level till $1350/$1360.

The near term support is around $1308 (10- day MA) and any violation below will drag the commodity down till $1300/$1295.Any break below $1276 confirms minor weakness.

 It is good to buy on dips around $1308 with SL around $1300 for the TP of $1334.