XAU/USD sees reversal near $1,860 amid anxiety over Fed rate hike

  • Gold prices showed exhaustion in the downtrend as the RSI (14) showed bullish divergence.
  • Concern over the Fed’s interest rate decision has put the Fx field on hold.
  • US job market sees 400k additions in April.

Gold price (XAU/USD) is hovering around $1,865.00 and is likely to remain on edge as uncertainty surrounding the Federal Reserve (Fed) monetary policy announcement has put the set on hold from the Fx domain. The precious metal posted a subdued performance at the start of the Tokyo session and is expected to remain lackluster until the announcement of the interest rate decision.

Gold prices will suffer a lack of investor attention for an extended period as the Fed’s determination to return to neutral rates will continue to push to raise interest rates sooner rather than later. . A 50 basis point (bp) interest rate hike is on the cards, but given decades-high inflation and steady full employment levels and rising wage prices, another Giant rate hike by the Fed seems imminent.

Meanwhile, the US Dollar Index (DXY) is trying to break above 103.50 this session. Besides Fed policy, the DXY is also focusing on the US Nonfarm Payrolls (NFP) release, which is due on Friday. US administration job additions in April are expected to land at 400k versus the previous print of 431k. Additionally, the unemployment rate appears to be falling to 3.5% from the previous figure of 3.6%.

Gold technical analysis

The formation of a bullish divergence on an hourly timeframe signals a bearish reversal. The asset hit a lower low while the Relative Strength Index (RSI) momentum oscillator (14) failed to record a new low, which showed exhaustion in the bearish momentum. The 50 and 200 exponential moving averages (EMA) at $1,871.63 and $1,890.96 respectively, still favor the downside. The RSI (14) is likely to find a cushion around 40.00, which will cause another bullish impulse wave to come.

Gold hourly chart