XAU/USD sees cushion around $1,830, Fed Powell in focus

  • Gold price is pricing support around $1,830.00 ahead of Fed Powell.
  • The Fed Powell could dictate the ideology behind the announcement of the 75 basis point rate hike in June.
  • The momentum oscillator RSI (14) calls for an advance of consolidation.

Gold prices (XAU/USD) are testing the waters after a strong rebound below $1,830 at the end of the New York session. The precious metal showed firmer reactive buying action but needs more screening to confirm a bullish reversal. Broadly speaking, a gradual bearish move could be attributed to the asset’s recent move, with investors keeping an eye on testimony from Federal Reserve (Fed) Chairman Jerome Powell.

The Fed has already raised interest rates by 75 basis points (bps) to 1.50-1.75% officially this month. Of note are the guidance on future monetary policies. Other than that, the Fed Powell at the May monetary policy conference dictated that a 75 basis point rate hike was not on the cards. Despite this, Fed Powell went above and beyond its statement and presented an exceptional rate hike. It is important to understand the ideology behind the choice of the 75 basis point rate hike.

Meanwhile, the US Dollar Index (DXY) turned sideways ahead of Fed Powell’s testimony. On Tuesday, the DXY rebounded strongly after hitting round level support at 104.00. Yields on the 10-year US Treasury were flat on Tuesday at around 3.30%.

Gold technical analysis

The trend line set from the June 16 high at $1,857.40 adjoining Friday’s high at $1,853.04 will act as major resistance for gold prices going forward. The precious metal is trading below the 21-period exponential moving average (EMA) at $1,835.24, signaling short-term weakness in the meter. Meanwhile, the Relative Strength Index (RSI) (14) has moved into a range of 40.00 to 60.00, signaling consolidation ahead.

Gold hourly chart

Richard L. Militello