Tuesday Jul 05, 2022

Gold Price Forecast: XAUUSD tumbles below $1,890.00 on Fed rate hike expectations, US PMI eyed

Gold (XAUUSD) Price has slipped below $1,890.00 as the US dollar index (DXY) has been strengthened on bolstering expectations of a decent rate hike by the Federal Reserve (Fed). The uncertainty over the announcement of the interest rate decision by the Fed is forcing investors to hide behind the DXY. Fed will certainly increase its interest rate by 50 basis points (bps) in its monetary policy meeting on Wednesday.

The catalysts which need significant attention from the market participants are the balance sheet reduction and further guidance on interest rates. The guidance from the fed will provide the roadmap for marching towards the neutral rates. The age of helicopter money is shifting to a tight liquidity environment, which will bring a long-term change in various assets.

Meanwhile, the US dollar index (DXY) is attempting to sustain above 103.40 after a strong rebound in today’s session as investors are seeing an outperformance from the US economy on the PMI front. The Institute for Supply Management (ISM) is expected to print the US PMI at 58 against the prior print of 57.1.

Gold technical analysis

On an hourly scale, XAUUSD is trading near the 50% Fibonacci retracement (placed from last week low at $1,872.24 to Friday’s high at $1,920.02) at $1,896.35, at the press time. The asset is likely to find a bullish impulsive wave after completing its correction to near 61.8% Fibo retracement at $1,890.70.

The Relative Strength Index (RSI) (14) has displayed a bullish range shift. The momentum oscillator remained in a bearish range of 20.00-40.00 and a directionless radius of 40.00-60.00 for a long period but has managed to shift into a bullish range of 60.00-80.00 and will focus on supporting itself from gyrating into a bearish range.



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