- Gold price licks it wounds after the recent sell-off.
- Dollar, Treasury yields steady ahead the key FOMC event.
- Fed decision, Jerome Powell’s policy outlook to determine gold’s next direction.
Gold price (XAU/USD) fell for the third day in a row on Tuesday and tested the $1850 psychological support before recovering slightly to near the $1860 region. The US dollar found renewed strength amid rising expectations that US Federal Reserve (Fed) could lay out the foundation for monetary policy normalization on Wednesday, as it plans to keep its policy settings unchanged this month. The greenback strengthened even though the US Retail Sales data disappointed while Producers Price Index (PPI) bettered expectations. The downbeat mood on Wall Street and weaker Treasury yields helped limit the losses in gold price. Despite the drop, gold price remained within Monday’s trading range.
Heading into the FOMC showdown, gold price is attempting a minor pullback, as the US dollar has stalled its advance, turning on the sidelines. Amid pre-Fed caution trading, gold is likely to keep its downside consolidative mode intact, although a brief rebound cannot be ruled amid repositioning. All in all, gold’s next directional move remains in the hands of Fed Chair Jerome Powell and his outlook on the economy, which will influence the American central bank’s next policy action. Patchy US labor market recovery could likely challenge Fed’s tapering expectations.
Gold Price Chart - Technical outlook
Gold: Four-hour chart
On the four-hourly chart, gold price has charted a bear pennant ahead of the FOMC event. It’s a bearish continuation pattern and therefore, risks remain titled to the downside for gold traders.
The Relative Strength Index (RSI) is trading listlessly below the midline while holding just above the oversold territory, suggesting that there is still some room left southwards.
Therefore, a sustained break below the rising trendline support at $1854 will validate the downside breakout, opening floors the 200-Daily Moving Average (DMA) at $1840.
Next on the sellers’ radars will be the May 14 low of $1820.
Alternatively, acceptance above the falling trendline resistance at $1866 will invalidate the bearish formation.
Further, if the FOMC disappoints the hawks, gold price could rebound towards the previous daily support now resistance at $1879.
Ahead of that barrier, the $1870 static resistance and bearish 21-Simple Moving Average (SMA) on the four-hour chart could challenge the bullish commitments.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.