XAU/USD Rejected Below 38.2% Fibonacci Ahead of FOMC
- Federal Open Market Committee’s two-day policy meeting is scheduled on Sept 21 and 22.
- On Monday, the gold price forecast remained bullish above the 1,745 support level, which is the double bottom level.
- Forex trading market participants may sell below the $1,753 level to target the $1,745 and $1,739 levels.
Gold prices were closed at $1751.40 after setting a high of $1767.80 and a low of $1747.10. Gold extended its loss for the third consecutive session and remained lower on Friday amid renewed strength in the US dollar. On Monday, the gold price forecast remained bullish above the 1,745 support level, which is the double bottom level.
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The greenback was strong on Friday, reaching 93.25, its highest level since August 28th. On the benchmark 10-year note, the US Treasury yield also extended its hike and gained 1.38% on Friday. Gold booked its worst weekly loss in six amid the rising strength of the US dollar. The dollar remained near a three-week high against a basket of six major currencies as investors awaited a critical US Federal Reserve meeting for clues on when the central bank will begin tapering stimulus.
FOMC Meeting This Week in Focus
The Federal Open Market Committee’s two-day policy meeting is scheduled on Sept 21 and 22. Investors are expecting clues when the US central bank will start withdrawing its asset purchases at the meeting.
These expectations kept the yellow metal lower for the day as reduced central bank stimulus tends to lift bond yields higher, which increases the opportunity cost of holding non-interest-bearing bullion. Furthermore, it also helped boost demand for the dollar, which further weighed on the yellow metal. The US dollar was also higher onboard after the release of US retail sales, which unexpectedly rose in August and further pushed down expectations for a sharp slowdown in economic growth in the third quarter.
Quick Update on Economic Events
On the data front, at 01:00 GMT, the TIC Long-Term Purchases in July dropped to 2.0B against the forecasted 60.5B and weighed on the US Dollar, which caused a further loss in gold prices. At 19:00 GMT, the Prelim UoM Consumer Sentiment dropped to 71.0 against the projected 71.9. It weighed on the US dollar, limiting the decline in gold prices. The Prelim UoM Inflation Expectation for September rose to 4.7% against the previous 4.6%.
Despite the poor-than-expected macroeconomic data on Friday, the greenback was strong onboard amid increased expectations of tapering at the upcoming policy meeting by the Federal Reserve. The risk barometer dropped during the last two days as a holiday in China and Japan joined a light calendar elsewhere.
China’s Evergrande and downbeat coronavirus updates
Furthermore, the fears of a Lehman-like collapse of China’s Evergrande and downbeat coronavirus updates keep weighing on the market trading sentiment. Meanwhile, the uncertainty over the US stimulus and debt limit edit and the latest pact among the UK, Australia, and the US also played a significant role in undermining market sentiment. China’s “highly distressed” real estate corporations are at risk of collapse as the country’s highly indebted developer, Evergrande is on the brink of default, warns AllianceBernstein’s Jenny Zeng.
Besides this, almost 1,300 projects in over 280 cities and multiple linkages abroad are also flashing red signals, making it a critical challenge to the global economic recovery. Apart from this, New Zealand reported new virus cases outside Auckland, which also burden the equity market. Thus, as reflected by the S&P 500 Index’s 0.15% decline, the risk-off market sentiment appears to be assisting gold in limiting its losses.
The market’s trading sentiment failed to stop its previous long downward performance and remained depressed around its monthly low, down 0.15% intraday near 4,415 during Monday’s Asian session.
Gold Price Forecast – Daily Support and Resistance
Pivot Point: 1753.60
Gold Price Forecast – FOMC Ahead
The gold price forecast remained bullish above the $1,745 support level, the double bottom level. The closing of candles below the pivot point resistance level of 1753.60 also provides significant pressure on gold.
The oversold gold has already completed 38.2% Fibonacci retracement at $1,768 levels, and it fell right after. Gold bears got rejected at 1,745 level, the double bottom level support level, and triggered a bullish bounce off. Further on the higher side, the next resistance will prevail at the $1760 level that marks 23.6% retracement for gold.
On the 4- hour timeframe, the 50 days EMA may provide resistance at the 1,766 level. Furthermore, the leading indicator, Stochastic RSI, remains below 50, indicating a strong gold-selling trend. Therefore, Forex trading market participants may sell below the $1,753 level to target the $1,745 and $1,739 levels. Alternatively, traders can take a buy position above the $1,755 level today. All the best!
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