XAUUSD Analysis: High haven demand bullish for XAUUSD

By IFCMarkets

High haven demand bullish for XAUUSD

Recent US economic data were dismal. The Labor Department report implied more than 25 million Americans sought unemployment benefits over the last five weeks. And Markit’s report indicated US manufacturing sector continued contracting in April. As businesses around the globe struggle to keep afloat under conditions of shutdowns, major industrial economies’ governments adopted monetary and fiscal stimulus programs to prop flailing economies. Thus, the Federal Reserve added $1.5 trillion of liquidity to the financial system on March 12 to stabilize money markets. It restarted the Quantitative Easing program on March 15 with the purchase of $500 billion in treasuries and $200 billion in mortgage-backed securities. The Federal Reserve expanded its asset purchases of both treasuries and mortgage-backed securities by an additional $625 billion on March 23. On April 9, The central bank announced new loan program totaling $2.3 trillion. On the fiscal side US administration launched a $2 trillion Phase Three stimulus bill On March 25 including direct cash payments to population , loan program to companies impacted by the outbreak, federally guaranteed small business loans , expansion of unemployment insurance, business tax cuts, funding to state governments and public programs. This Tuesday Senate passed another coronavirus relief package worth nearly $500 billion to replenish funds for small businesses. The European Central Bank announced on March 19 it will purchase roughly $800 billion of additional bonds throughout 2020 in excess of $128 billion announced on March 12. The Bank of Japan announced on March 16 a doubling of the rate at which it was purchasing Exchange Traded Funds from $56 billion a year to $112 billion. The uncertainty that followed the coronavirus outbreak and massive monetary stimulus programs have boosted safe haven demand which is bullish for XAUUSD.

Summary of technical analysis

Market Analysis provided by IFCMarkets