Gold Cautious after its 2nd Straight Losing Month & the Rejection of Key Technical Levels

  • XAUUSD
    (${instrument.percentChange}%)

XAU/USD Analysis

The US Dollar finds renewed vitality this week, as the Fed has been trying to reassert its hawkishness and its commitment to further monetary tightening in order to bring down inflation.

After the Fed's last policy meeting in early-May, Chair Powell said that more 50 basis points rate hikes "would be on the table at the next two meetings" [1] and this week governor Waller (voter) offered a glimpse of the bank's intentions beyond July.

Mr Waller declared his support for hikes of that size "for several meetings" and until he sees inflation closer to the 2% target, adding that he is in favor of the policy rate "at a level above neutral" by the end of the year. [2]

This USD strength, has not allowed the precious metal to take advantage of various risk factors, such as poor PMI's from China, the new sanctions on Russian Oil by the European Union and the halt of gas supply by Gazprom to Denmark and the Netherlands.

The two-week rebound of XAU/USD falters after the rejection of key technical levels. It had managed to extend the advance up to the 38.2% Fibonacci of the April High/May low drop, as we had pointed in past analysis, but this created selling pressure.

This makes it vulnerable to further losses, but we are cautious at this stage for a test of 1.805, that would create risk for new 2022 lows (1,780-6).

Despite this week's slide, the Relative Strength Index (RSI) tries to bounce from oversold levels and we can see Gold finding support. This could give it the chance to take another crack at the critical 1,860-8, but this is a strong resistance as it includes the 200Days and H4 EMAs and the aforementioned Fbonacci.

As such, surpassing this level remains hard, but a successful effort could open the door towards the descending trendline from this year's highs (1,909-12).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 01 Jun 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20220504.htm

2

Retrieved 19 Aug 2022 https://www.federalreserve.gov/newsevents/speech/waller20220530a.htm

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