- Dollar index Starting the week on the back foot.
- The $1670 level remains key for XAU/USD.
- Rate hike expectations and Dollar index Stay keyed to the next move in precious metals.
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XAU/USD Fundamental background
gold enjoyed a bounce in the Asian session to return above the $1,650 level on a weaker-facilitated move dollar index. The move follows a three-week low closed last week as fundamentals and continued hawkish central bank rhetoric threaten to push the precious metal to year-to-date lows. The precious metal doesn’t seem fazed by the comments from US Federal Reserve politicians at the weekend. We heard from policymakers Esther George and Mary Daly, who hinted that the Fed may need to raise rates to a higher level than previously expected after last week US CPI Print.
The dollar index and the Federal Reserve
Any changes in the precious metal this week are likely to depend on a variety of external factors, including the dollar index. Hotter than expected after last week US CPI Print the probability for a 75bp hike by US Federal Reserve about 96% are resting at the upcoming November meeting. Initial talk of a 100 bp increase by the Fed. November seems to have ended as the new week approaches, which could help the precious metal recover and move higher at the start of the week.
Source: CME FedWatch Tool
The focus now is on US housing data due this week. In July, US housing prices fell for the first time in a decade as rising interest rates undoubtedly weighed on demand. The net effect of lower housing demand is likely to reduce retail sales in some sectors, while affecting construction and job creation. This, in turn, can help reduce inflation and lead to a decline rate hike expectations for the Fed approaching 2023 and could help the precious metal as it looks to recover from last week’s losses. Positive housing data this week could be a rallying cry for precious metals as it reinforces the idea of continued hikes in They fed well in 2023.
For all the economic releases and events that drive the market, see DailyFX Calendar
XAU/USD Daily Schedule – October 17, 2022
Technically, we had a bearish daily candle on Friday that has since bounced back 76.8% fiber level. The price remains below 20, 50 and 100-SMA with the slope of the gradient hinting at a further decline. The overall bias remains bearish as long as the price remains below the double top pattern near the $1730 area.
On the other hand, the intraday forecast hints at a potential rally with possible resistance levels at $1,660 and $1,670. Price action the shorter timeframes are printing higher highs and higher lows with a weaker dollar index helping push the precious metal higher. Caution is advised as we approach the resistance area around $1,670 as there are plenty of confluences left that could come into play and push the price down. A daily candle closing below the $1,640 support area opens a retest of the year-to-date lows and possibly Psychological level of 1600 dollars.
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Key intraday levels to watch are:
Areas of support
• 1640 year
• 1614 year
• 1600 year
Zones of resistance
• 1672 year
• 1685 year
• 1700 year
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Written by: Zane Vauda, Markets Writer DailyFX.com
Connect with Zane and follow him on Twitter: @zvawda