Talking Points:

• The three-day slump continues as XAU/USD recovers off the weekly/daily low but remains under pressure.
• Price pressure from inflation and recession worries, news about China, and the market’s inaction questions bears.
• The US Q1 2022 PCE data and the panel discussion at the European Central Bank (ECB) Forum will be essential for a new charge.

Despite the recent recovery from the intraday low, XAU/USD is still struggling at about 1,820 USD. By doing so, the precious metal creates a three-day downturn as traders wait for the important data and events of the upcoming week during today’s slow Asian trading session.

After shattering a short-term symmetrical triangle the day before as market mood weakened due to fears of an impending recession and inflation, bullion prices retreated to their weekly low. However, the recent cautious optimism surrounding China appears to be posing a problem for the XAU/USD bears.

News sources reported that “China will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days at home, health authorities said on Tuesday.” The news also joined the latest comments from the US Deputy Commerce Secretary Don Graves who said, “A clear US response on China tariffs is coming soon.”

Elsewhere, a rise in one-year US consumer inflation expectations and aggressive Fed language helped to revive the demand for the USD as a safe haven. For the second consecutive month, the US Conference Board (CB) Consumer Confidence Index fell in June, falling to 98.7 from 100.0 projected and 103.2 in May. As a result, the closely watched consumer mood index fell to its lowest point since February 2021. Additional information showed that the one-year consumer inflation rate predictions increased from May’s corrected reading of 7.5 to 8 %. It should be noted that, according to the most recent data for May, the US trade deficit fell to 104.3 billion USD, the lowest level in a year.

While Wall Street closed in the red, the US 10-year Treasury yields broke a two-day uptrend during these plays. However, the S&P 500 Futures show modest advances and recently seemed to test the XAU/USD bears.

Next, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, which is forecast to stay at 5.1 %, will provide crucial context for the central bankers’ deliberations at the ECB Forum. The selling of XAU/USD may get more strength if Fed Chair Jerome Powell is successful in defending hawkish policy decisions.

Technical Analysis

XAU/USD bears are still optimistic as a clear downside breach of the two-week-old symmetrical triangle joins bearish moving average convergence divergence (MACD) and sliding relative strength index (RSI) line signals.

A good break of the 61.8 % Fibonacci retracement (Fibo.) from the 16th of May to the 12th of June adds to the metal’s bearish momentum.

Having said that, the XAU/USD bears are moving toward the 78.6 % Fibo, which is located around 1,805 USD. The 1,800 USD obstacle may test more downside, before sending bullion prices towards the year low from May, which was around 1,786 USD.

To limit the short-term upside of XAU/USD prices, the support line of the aforementioned triangle, which is now resistance around 1,823 USD, comes before the 61.8 % Fibonacci retracement level.

The 50 % Fibo level around 1,835 USD can entice XAU/USD bulls. The weekly high is close to 1,830 USD. The major obstacle to overcome for the bulls to reclaim control, however, looks to be the convergence of the 100-day simple moving average (SMA) and the upper line of the aforementioned triangle, around 1,837-38 USD.

XAU/USD Four-Hour Chart: