The precious metal makes kicked-off the new quarter on the offensive, capitalizing on last week's rebound from the lowest level since April 2020 and the height of the pandemic. This is largely due to recent USDollar weakness, as recession fears have led to a moderation of market expectations around the Fed's next rate moves.
At the time of writing, CME's FedWatch Tool still prices in a 75 basis points increase next month, but with a lower sub-60% probability, whereas expectations for December are roughly split between 25 and 50bps hike. 
This has allowed XAU/USD to enter its second straight profitable week, having closed Monday above the EMA200 (black line) and covering around half of its drop from the August highs to September lows. This brings the descending trendline from the summer highs in its eyesight (at around 1,740).
However, the upside seems well protected, as the daily Ichimoku Cloud and the 200Days EMA follow, and we are still cautious around the ascending prospects.
Despite recent USD deflation, the Fed remains committed to its hawkish policy and singularly focused to bringing inflation down and it is hard to see sustained greenback weakness if that does not change.
Furthermore, the Relative Strength index hit the highest level since late July, which had eventually led to the last leg lower over the last two month and the 2+ year lows. As such, XAU/USD is vulnerable to renewed pressure back below 1,659, but sub-1,608 don't seem easy in the near-term.
Moreover, XAU/USD comes from a six-month losing streak, while the recent rebound is still nascent and could be just a typical pullback to the bearish Double-Tops formation, which we have highlighted in previous articles.
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.
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