FxWirePro: Gold recovers sharply on dovish Fed comments, good to buy on dips

Gold has lost nearly $20 from high of $1298 on better than expected US Non farm payroll data. US economy has added 312000 jobs for the month of Dec compared to forecast of 180000 and unemployment rate at 3.9% . US Fed Chairman Powell said that Central bank will pause rate hike and will not if Trump asks him. It is currently trading around $1291.50.

The major three factors that drive gold prices

 US dollar Index: neutral. DXY is trading weak for third consecutive day and lost nearly 100 pips from high of 96.96. The index should break below 95.65 for further weakness. Any break below targets 95/94.80.Major trend reversal level is around 97.75.(slightly positive for gold).

USD/JPY: Neutral. USDJPY has shown a good recovery of more than 350 pips after a huge sell-off . The pair hits high of 108.58 and is currently trading around 108.18. Slightly negative for gold.

 US 10 year yield : US 10 year yield has recovered more than 5% after hitting 12-month low at 2.54%. The yield has declined sharply in past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.66%.Slightly negative for Gold.

 US 2 year yield: It is trading around 2.50%.The spread between US 10 year and 2 year has declined to 16 bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 5 year yield trading below US2 year yield).

Gold technical

Major support $1183

 On the higher side, yellow metal hits low of $1276.70 and shown a good jump.Any break above $1300 will take the gold to next level till $1320.

The near term support is around $1275 and any violation below will drag the commodity down till $1266/$1252/$1242 /$1234.

 It is good to buy on dips around $1265-66 with SL around $1252 for the TP of $1320