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Chart of the Day: XAUUSD

The recent state of uncertainty in risk markets is showing in the price of XAUUSD. It’s been sideways range trading since early August as the markets gently swing from risk-on to risk-off. The doom and gloom of Brexit and the US-China trade war are once again in the spotlight this week ahead of Thursday’s ECB rate decision: a crucial potential catalyst for further XAUUSD implied volatility.

XAUUSD daily chart
"XAUUSD daily chart"

Despite talks of a “phase one” trade deal, the US and China are giving the market different signals. Add to that the delayed UK parliament vote on Saturday and the request for yet another Brexit extension, the market could start to scream for safety. In that case, all eyes turn to XAUUSD.

Watch how pricing reacts to a break of the 1485.00 horizontal support mark. The fundamental picture suggests the breakout of the current falling flag pattern is imminent — predominantly on growing global macro playout. The key level to watch on the upside is the 1517.44 peak: a strong breakout above here would spur the bidders for a test of the 4 September high at 1557.38 mark. On the other hand, positive macro playbook events will see any rally in XAUUSD savaged to the downside, with 1458.00 the key support level.

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