Gold Stable in Holiday Trade

Gold is trading quietly on Monday, with a spot price of $1277.78 per ounce. Gold had an excellent week, as the metal climbed 4.4 percent against the dollar. There are no US releases on Monday, as the markets are off for Martin Luther King Day.

Currency markets were in turmoil on Thursday, as the Swiss National Bank abruptly abandoned its cap on the exchange rate between the euro and the franc, which had a floor of 1.20 for EUR/CHF. The cap had been in place since 2011, and the move marks a major policy reversal for the normally conservative Swiss central bank. Market reaction was swift, as the euro dropped some 15% against the franc, as the pair is currently trading at parity. The euro also slipped against the dollar on Thursday, losing about 160 points on the day.

Why the dramatic move by the Swiss? One reason is an attempt to fight deflation, which is hurting the Swiss economy. As well, with the euro losing value, the SNB has had to increase its euro purchases to keep EUR/CHF within the cap, and the SNB may have finally soured on the common currency. The stunning move indicates that the SNB believes that the ECB will implement quantitative easing at its policy meeting on Thursday and didn’t want to have to prop up the ailing common currency, which will likely lose ground after a QE move.

Overshadowed by the SNB announcement were disappointing US releases. Unemployment Claims surprised with a weak reading of 316 thousand. This was well above the estimate of 299 thousand and was the highest reading since June 2014. However, the first full week of the year often shows a spike in claims, since holiday workers are dismissed, resulting in a higher number of claims. Elsewhere, PPI posted a decline of 0.3%, matching the forecast. Manufacturing data was mixed, as the Empire State Manufacturing Index rose to 10.3 points, while the Philly Fed Manufacturing Index slipped to 6.3 points, its worst showing in 11 months.

XAU/USD for Monday, January 19, 2015

XAU/USD January 19 at 10:35 GMT

XAU/USD 1277.88 H: 1279.21 L: 1274.45

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1240 1255 1275 1300 1322 1345

 

  • XAU/USD is flat on Monday, as the pair trades just above support at 1275.
  • On the downside, 1275 is fluid. 1255 is stronger.
  • 1300 is an immediate resistance line.
  • Current range: 1275 to 1300

Further levels in both directions:

  • Below: 1275, 1255, 1240, 1215 and 1200
  • Above: 1300, 1322, 1345 and 1375

 

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged on Monday. This is consistent with the lack of movement we’re seeing from the pair. The ratio remains close to a split between long and short positions, indicating a lack of trader bias as to what direction the pair will take next.

XAU/USD Fundamentals

  • There are no US releases on Monday.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.