XAUUSD drops below $1,890.00 on Fed rate hike expectations, US PMI eyes

  • The price of gold is expecting another bullish impulse wave as the RSI (14) has moved into a bullish range.
  • Fed policy this week will keep investors on their toes.
  • The surge in inflation hints at a giant rate hike by the Fed.

The price of gold (XAUUSD) slid below $1,890.00 as the US dollar index (DXY) gained strength adding to expectations of a decent rate hike by the Federal Reserve (Fed ). Uncertainty surrounding the Fed’s interest rate decision announcement is forcing investors to hide behind the DXY. The Fed will certainly raise its interest rate by 50 basis points (bps) at its monetary policy meeting on Wednesday.

The catalysts that require particular attention from market participants are balance sheet reduction and new directions on interest rates. The guidance from the Fed will provide the roadmap for moving towards neutral rates. The era of helicopter money is shifting to a tight liquidity environment, which will lead to a long-term shift in various assets.

Also Read: Gold, Oil Prices Rise as U.S. Consumer Spending Rises, Amazon Crashes as Q1 Earnings Fall Short of Expectations [Video]

Meanwhile, the US Dollar Index (DXY) is trying to hold above 103.40 after a strong rebound during today’s session as investors see the US economy outperforming. on the PMI front. The Institute for Supply Management (ISM) is expected to print the US PMI at 58 versus the previous print of 57.1.

Gold technical analysis

On an hourly scale, XAUUSD is trading near the 50% Fibonacci retracement (placed from last week’s low at $1,872.24 to Friday’s high at $1,920.02) at $1,896.35, at press time. The asset is likely to find a bullish impulse wave after ending its correction near the 61.8% Fibo retracement at $1,890.70.

The Relative Strength Index (RSI) (14) showed a bullish range shift. The momentum oscillator stayed in a bearish range of 20.00-40.00 and in a directionless range of 40.00-60.00 for a long period of time, but managed to break into a bullish range of 60, 00 to 80.00 and will focus on its ability to break out of the gyration into a bearish range.

Gold hourly chart