Gold Price Forecast: XAU/USD rebounds above $1,990 but needs to pass more filters to regain confidence

Gold price (XAU/USD) has shown some buying interest after dropping below $1,990.00 in the Tokyo session. The precious metal has witnessed some recovery as the US Dollar Index (DXY) is struggling in extending its upside move further above 102.70. The Gold price has yet not developed a strong upside bias as it needs to pass through more filters for gaining traction.

S&P500 futures have added decent gains in Asia despite the postponement of approval for raising the US Treasury borrowing cap limit. One thing is for sure that the approval of default is off the table. Every delegate has admitted that the US debt-ceiling cannot be raised along with bulking spending initiatives as it could be a disaster.

The postponement of approval for the debt-ceiling cap has improved demand for US government bonds. This has led to a decline in 10-year US Treasury yields to 3.53%.

The USD Index is facing barricades in extending its recovery above 102.70 as a slower pace in the expansion of US Retail Sales has strengthened expectations of a steady monetary policy stance by the Federal Reserve (Fed). The economic data expanded at a slower pace of 0.4% against the estimate of 0.7%. A mild expansion is insufficient to impact expectations for a steady monetary policy by the Fed.

Gold technical analysis

Gold price has delivered a breakdown of the Rising Channel chart pattern formed on a four-hour scale, however, the breakdown needs to pass some more filters yet. An intermediate resistance is plotted from May 05 low at $1,999.54. Downward-sloping 10-period Exponential Moving Average (EMA) at $2,000.00 is barricading the Gold bulls.

The Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, which indicates more downside ahead.

Gold four-hour chart