Oct 17, 2022
VOT Research Desk
Market Analytics and Considerations
$1670 Level Remains Key for XAU/USD
Rate Hike Expectations and the DXY Remain Key to the Precious Metals Next Move.
Essential Background for XAU/USD
A weaker dollar index helped gold bounce back in the Asian session to trade back over the $1650 mark. The action follows a print to close last week that was three weeks below average as factors and persistently aggressive central bank language threaten to drive the precious metal into its YTD trough. The precious metal doesn’t seem to be affected by the weekend remarks made by US Federal Reserve policymakers. Esther George and Mary Daly, two policymakers, hinted that the Fed would need to raise rates further than anticipated in response to the last US CPI report.
Federal Reserve as well as the Dollar Index
This week’s movements in the price of the precious metal are anticipated to depend on a variety of outside variables, including the dollar index. Following last week’s hotter-than-expected US CPI reading, there is a 96% chance that the US Federal Reserve will raise interest rates by 75 basis points at its forthcoming November meeting. As we start a new week, initial speculation about a 100bp Fed rate hike in November appears to have died down, which may aid the precious metal in regaining its footing and moving higher early in the week.
Now the attention is on US housing data that is expected this week. In July, prices on the US home market fell for the first time in ten years as a result of declining demand and rising interest rates.
A decrease in retail sales in some industries is anticipated to follow the domino effect of decreased housing demand, which will also have an impact on building and job development. This might thus serve to reduce inflation going forward, result in a reduction in the Fed’s expected rate hikes in 2023, and possibly help the precious metal recoup some of the losses it suffered last week. The precious metal may struggle this week as positive housing data support the notion that the Fed will maintain raising interest rates far into 2023.
Technically speaking, the daily candle that closed on Friday was bearish, and the price has subsequently retraced off the 76.8% fib level. Price is still below the 20, 50, and 100-SMA, and the gradient’s slope suggests further declines. As long as the price is below the double-top formation near $1730, the overall bias is still bearish.
On the other side, the intraday picture suggests a probable upward advance, with potential resistance levels between $1660 and $1670. A weaker dollar index is helping to propel the precious metal higher as price action on shorter timeframes prints higher highs and higher lows. It is advisable to exercise caution as we approach the resistance region near $1670 because there are still a number of confluences that could occur and cause the price to decline. The YTD lows and possibly the $1600 symbolic level might be tested again if the daily candle closes below the $1640 support area.
Important intraday indicators to keep an eye on:
Support Sectors
•1640
•1614
•1600
Resistant Zones
•1672
•1685
•1700
