Gold recovers toward $1300 as DXY extends losses below 94

• USD continues to weaken against its peers.
• Positive market sentiment is likely to limit gold's gains.
• Factory orders & ISM NY Business Conditions index to be released later in the session.

Following a couple of failed attempt to break above the 200-DMA resistance, the XAU/USD pair finished the previous week $5 lower at $1292 but was able to start the new week on a positive note. As of writing, the pair is trading at $1296, adding 0.22% on the day.

The pair's modest recovery on Monday seems to be the product of a weaker greenback. After moving sideways near the 94 mark during the Asian session, the US Dollar Index lost its traction and recently dropped to a session low of 93.66. Nevertheless, this recent fall seems to be technical in nature with no apparent catalysts that may have caused a USD sell-off. At the moment, the index is down 0.4% at 93.75.

The heightened risk appetite amid an improved market sentiment on Monday is reflected upon equity indexes. While major American indices are pointing to a higher start, Germany's DAX and the UK's FTSE are up 0.3% and 0.6% respectively. In case the risk-on mood carries over into the second half of the day, we may see the gold find more market demand due to its safe-haven status.

Later in the NA session, April monthly factory orders and the Business Conditions Index released by the ISM NY will be released. Nonetheless, these data are not expected to impact the price action.

Technical levels to consider

Despite this recent recovery, the CCI indicator on the daily graph is having a difficult time pulling away from the 0 mark, suggesting that the pair is likely to remain neutral in the near-term. On the upside, $1300 (psychological level) is the first technical resistance ahead of the critical $1307 (200-DMA) and $1317 (50-DMA) level.

On the flip side, short-term supports are located $1292/90 (May 24 low/Jun. 1 low/Jun. 4 low), $1282 (May 21 low) and $1273 (Dec. 25 low).