Home Forex Market Analysis Gold (XAUUSD) Under Pressure despite Dollar Softness as USDCAD Rallies on Oil...

Gold (XAUUSD) Under Pressure despite Dollar Softness as USDCAD Rallies on Oil Sell-off

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Gold (XAUUSD) under Pressure despite Dollar Softness as USDCAD Rallies on Oil Sell-off
  • US dollar softness at 16-month highs
  • Gold struggling for direction after the recent pullback
  • USDCAD turns bullish on oil prices sell-off
  • Turkish lira woes persist after Finance Minister firing

The US dollar is struggling for direction after the recent pullback but continues to trade at 16-month highs against the majors. The dollar index, which tracks the greenback strength against the majors, continues to trade in a tight trading range of between 96.11 and 95.83.

Dollar softness in recent days has come at the backdrop of US Treasury yields edging lower, with the 10-year yield tanking to about 1.48%. However, the dollar has continued to hold on to gains at 16-month highs, its sentiments having been bolstered by strong demand for safe-haven in the face of the Omicron COVID-19 variant.

Gold technical analysis

The Federal Reserve reiterating it could accelerate asset purchases in a bid to clamp down on runaway inflation has continued to offer support to the greenback against the majors. Gold has struggled to take advantage of dollar softness and a retreat of yields from 4-month highs.

XAUUSD has since plunged below the $1800 level and is struggling for direction at the $1776 level. Every bounce back to the $1800 level has attracted short-sellers who have come into the fray and pushed the metal lower.

Chart showing XAUUSD under pressure

The $1795 area has emerged as the short-term resistance level curtailing any upward action on the XAUUSD. After tanking below the $1780 level, the precious metal remains susceptible to further losses back to the $1770 mark, a crucial support level.

A break below the $1770 level could trigger an accelerated sell-off that could see the precious metal tanking to lows of $1750, the next substantial support level. On the flip side, a rally followed by a close above the $1800 could attract more bulls that could bring the corrective phase to an end.

Gold fundamentals

Gold sentiments in the market have been hurt by market participants rushing to traditional safe-havens in the face of Omicron fears. Government bonds and Japanese yen have continued to attract bids at the expense of the yellow metal.

Additionally, Gold remains under pressure from Federal Reserve Chairman Jerome Powell, hinting at accelerated bond purchases at a senate committee hearing. The remarks only go to affirm strength on the dollar and yield something that could continue to hurt gold sentiments as it does not bear any yields.

Looking ahead, gold prices could remain range-bound ahead of a pivotal US jobs report for November on Friday. The report should provide insights on the labor market, an important economic metric that the FED is watching as it looks to ease monetary policy.

Canadian dollar weakness

Meanwhile, the Canadian dollar remains under pressure, its sentiments having been hurt by oil prices edging lower below the $70 a barrel level. The USDCAD pair has since powered to two-month highs as the dollar continues to strengthen against the Loonie.

After initially touching highs of 1.2835, USDCAD has pulled back slightly to the 1.2780 level in what appears to be a profit-taking spree. The pullback is staring at strong support near the 1.2730 level above which the pair remains bullish.

Chart showing USDCAD eyeing 1.2800

The bullish bias on the USDCAD remains intact on oil prices tanking to the $66 a barrel level. Being Canada’s most significant export product, oil influences the loonie sentiments in the market a great deal. The CAD sentiments have also taken a hit on risk appetite waning in the aftermath of the Omicron variant, which has sent investors into safe havens such as the dollar and the yen.

Price action suggests USDCAD could continue moving up as the dollar strengthens, given its safe-haven allure. Additionally, the focus is on the release of the US Non-Farm Payroll report for November, which could sway traders’ sentiments on the dollar.

Turkish lira

Chart showing Turkish Lira weakness against dollar

Separately, the Turkish lira remains under pressure against the dollar amid reports that President Tayyip Erdogan has fired the Finance minister. The currency continues to trade at about 13.34 against the greenback.

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