Chart of the Day: XAUUSD
Federal Reserve Chair Jerome Powell and the minutes from the June FOMC meeting have indicated a clear easing stance and a reduction of the fed funds rate in the coming months, as the US economy potentially enters a new cycle. Powell said the uncertainties continue to dim their outlook, and the central bank will act appropriately to sustain the US economic growth. With a July cut effectively a done deal, the USD has faced a few headwinds, with gold gaining traction once again.
That said, the hotter-than-forecast core CPI at 2.1% has seen traders fade the rally into US$1,425.
Right now, the XAUUSD is sitting just shy of the multi-year highs, although we see price consolidate in a US$1,425 to US$1,381 range. After such a strong run from the May lows, it’s no surprise to see this sideways move, and there’s a clear battle between the bull and bear to exert their dominance. These are critical levels, as an upside break of US$1,439.38 would provide a strong base for bullish continuation rally. However, on the downside, we see strong support into US$1,381, with the 38.2% Fibonacci retracement of the May rally sitting below at US$1,374. A break of the short-term range low would bring this retracement into play.
Timing is always important, given the pair has been consolidating for 13 days straight, printing lower highs and higher lows in price. As there are no major events in today’s economic calendar, there remains the potential for a further extension in this consolidation.
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*Investment Trends 2017 Australia FX Report