Last week, the Fed finally paused its tightening cycle, settling at a range of 5.00-5.25%. Their rationale behind this decision was to await additional economic data before determining any further interest rate increases. Their aim is to carefully calibrate the appropriate level of monetary restraint necessary to lower inflation to the desired 2% target without inflicting excessive strain on the economy. They have also added 50 bps to their projected terminal rate in the Dot Plot to show their commitment in fighting inflation. The economic data is now what really matters as even the Fed doesn’t know how much tightening is still needed or where the economy will be in the next six months.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that the trendline has been breached, but the price has kept on ranging as the market remains uncertain on the Fed’s rates path. The support at 1934 was briefly breached last week, but thanks to another miss in the US Jobless Claims, gold has bounced back into the range. The red 21 moving average has been acting as dynamic resistance for the sellers to enter the market but it’s now getting weak as the moving averages threat a crossover due to the rangebound price action.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the month-long range where gold has been stuck into. We have the support level at 1934 and the resistance level at 1984. A clear break on either side supported by a fundamental catalyst should lead to a big move afterwards as momentum traders enter the market. For now, we will likely range till the second part of the trading week as there’s not much on the data front to move the market until Wednesday at least.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we also have a strong mid-level that’s been acting as both support and resistance. It acts like a sentiment barometer where we can see more upside when the price stays above the level, and more downside when it falls below it. Therefore, aggressive buyers are likely to pile in here with a tight risk below the level and target the 1984 resistance. The sellers, on the other hand, will look to pile in once the price breaks below the level to target the 1934 support.
This week is relatively empty on the data front with just the US Jobless Claims and the US PMIs scheduled for Thursday and Friday respectively. Nonetheless, we will hear from many Fed members with the Fed Chair Powell also testifying to Congress on Wednesday and Thursday.
