Gold: correlating USD weakness

The markets rebound as of the start of the week, after the ISM Services PMI for July was published, showing some better than expected results at the level of 51.4. This result decreased the market expectation that the US is entering into recession as it showed that the services sector in the US stands at relatively solid grounds. Still the US Dollar was weakening during the first half of the week and gold was following its negative correlation to this currency. The lowest weekly level of gold was at $2.370, however, it is ending the week at $2.430 and again above its strong support line at 2.4K.

The RSI reached the level of 55 as of the weekend, not indicating that investors are ready to take a road toward the oversold market side. This adds to the probability that the price of gold still has some space for a move toward the upside. Moving averages of 50 and 200 days continue to move as two parallel lines, without any indication over a potential cross in the coming period.

The level of 2.4K is currently quite an important level for the price of gold, as it could not be breached to the downside, since the beginning of July this year. Considering that July inflation data and the Retail Sales are scheduled to be released in a week ahead, there is high probability that the volatility will be back on the market. However, current charts are pointing that the gold will continue to test the 2.4K for its potential to the downside. Still, there is also equal potential for the higher grounds, at least to the level of $2.450.