The Fed has delivered 300 basis points worth of rate hikes since the March lift-off, in its most aggressive tightening cycle in at least three decades, in order to restore price stability. This has been the main source of strength for the US Dollar, trumping over other assets.
USD/JPY hit 32-year highs last month, EUR/USD dropped below parity for the first time in twenty years and GBP/USD slumped to all-time lows after the mini-budget debacle.
Gold has not been spared from the Fed-US Dollar wrecking ball, since after a strong start to the year, it has collapsed into a massive seven-month losing streak, not seen in many decades.
As I have written in the past, XAU/USD has registered a double-top formation (peaks of August 2020 and March 2022) and has now closed two straight months below the relevant neckline and the 38.2% Fibonacci of the 2015 low/2020 high advance (1,682-76).
This exposes the precious metal to the 50% Fibonacci (1,561) and if the formation is confirmed, there is possibility for further losses towards the 200-Months EMA at around 1,230.
However, such a move would need time to play out fundamentals would need to continue to be against gold. Looking at smaller timeframes, XAU/USD tries to put up a fight at the beginning of November, although the next leg of the move will likely be determined by today's Fed rate decision.
The precious metal is constructive today, eying key 1.968-75 area, which contains the EMA200 and the lower border of the Daily Ichimoku cloud. Breaking above it may require a catalyst, but successful effort would bring the broader 1711-29 region in the spotlight. This includes October's high and the descending trendline from the summer highs.
Despite the upbeat start to the current month, the upside is protected by strong clusters of resistance and bias is clearly on the downside. XAU/USD remains in precarious position and in risk of new 2+ year lows (1.614), but 1,560 is distant for now.
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.