Gold was trading inside the prior day's range yesterday, which suggests investor indecision and impending volatility. Traders are likely keeping their eyes on today’s European Central Bank monetary policy decisions, followed by a press conference with ECB President Mario Draghi. The ECB could cut rates by 10-basis points, but at the very least, the central bank will signal fresh stimulus for September. A more dovish than expected announcement could drive gold prices lower and the U.S. Dollar higher. Moreover, on the economical calendar front, traders will most likely react to a few U.S. economic reports including Flash Manufacturing PMI, Flash Services PMI and New Home Sales. Strong reports could put pressure on gold because this would raise uncertainty about the need for a Fed rate cut next week.
Gold spiked early in the day to $1430 but ended Wednesday's session at $1426, unable to break through the $1427 resistance level (R1). Price missed to decisively move beyond the previous day's trading range in a lackluster session. The short-term trend is still bullish, however, as we are still trading above the 20-period moving average. Buying might speed up should prices close above the nearby high at $1430 to target the $1441 key resistance level (R2). Alternatively, should a fundamental catalyst drive down prices below the $1418 support level (S1) and 20-period MA, the short-term trend could turn bearish.
Support: 1418 / 1401
Resistance: 1427 / 1441