Gold Price Outlook Shifts Rosy Post FOMC, XAU/USD Eyeing US GDP Data Next

Anti-fiat gold prices climbed over the past 24 hours following Wednesday’s FOMC monetary policy announcement. The central bank left benchmark lending rates and the pace of quantitative easing unchanged, as widely expected. The details of the statement, as well as Chair Jerome Powell’s press conference, depressed the US Dollar and Treasury yields.

When both the latter are falling, it tends to bode well for XAU/USD given that it is a non-yielding asset. There was a kneejerk reaction to the Fed. Markets were initially spooked by the statement as the central bank noted that the economy made progress to its maximum employment and price stability goals. Policymakers noted that they are closer to tapering.

However, the mood quickly reversed course as it soon became clear that the central bank is still quite dovish. Powell said that the labor market is ‘some ways off’ before reaching substantial further progress. He reiterated that inflation is transitory. Treasury yields quickly turned lower as his commentary likely suggested that tapering is still not quite around the corner just yet, opening the door to optimal stock market conditions.

The first estimate of US second-quarter GDP is due over the coming 24 hours. Annualized growth is expected at 8.5% q/q from 6.4% prior. Atlanta’s Fed GDPNow Q2 real growth estimate has been notably trending lower since April, currently standing at 6.4%. A softer-than-expected outcome could underscore the central bank’s hesitation. If such a result depresses bond yields further, gold could continue benefiting.

Gold Technical Analysis

Gold prices may be readying to extend recent gains after prices recently pierced a near-term falling trendline from earlier this month on the 4-hour chart below. This also follows positive RSI divergence, showing that downside momentum was fading. Extending gains may see prices aim for the July 15th high at 1834. That would also leave XAU/USD back above the 200-period Simple Moving Average.

XAU/USD 4-Hour Chart

Forex Today: Persistent pressure on the dollar

The greenback kept falling and reached fresh weekly lows against most major rivals, as US data missed the market’s expectations.  Q2 Gross Domestic Product showed the economy grew at an annualized pace of 6.5%, better than the previous 6.4%, although missing the 8.6% expected. Also, Initial Jobless Claims for the week ended July 23 printed at 400K, worse than anticipated.

EUR/USD trades near 1.1900 while GBP/USD approaches the 1.4000 figure. The Canadian dollar also reached fresh highs against the greenback, but AUD/USD is stuck around 0.7400 as demand for the aussie remains scarce.

The Japanese yen appreciated on the back of a better market’s mood, with USD/JPY trading around 109.40.

Spot gold jumped to $1,832.62 a troy ounce, its highest in two weeks, while crude oil prices also reached fresh highs, with WTI ending the day at $77.50 a barrel.

Wall Street closed in the green, still underpinned by relief after the Fed hint at no rush to taper. US government bond yields ticked higher.

Gold Price Forecast: XAU/USD pokes key hurdle around $1,835 amid risk-on mood

Update: Gold (XAU/USD) prints the heaviest daily gain in 11 weeks, despite recently easing from the monthly top, by the end of Thursday’s North American trading session. That said, the yellow metal jumped to $1,832.70 before stepping back near $1,828.50 by the press time.

Strong gains of the gold prices could be linked to the US dollar’s performance and a broad optimism in the market.

The US Dollar Index (DXY) dropped to a one-month low, posting a four-day losing streak, before closing around 91.91 with 0.39% daily losses. In doing so, the greenback gauge ignores the three basis points (bps) of an upside by the US 10-year Treasury yields to 1.266%. On the same line, the Wall Street benchmarks also posted mild gains by the end of the day’s trading.

After the Fed’s resistance to discuss tapering, downbeat US Gross Domestic Product (GDP) figures for Q2 and other US data justified the need for tapering and propelled market sentiment. The preliminary reading of the US Q2 GDP dropped below 8.4% expected to 6.5%, versus 6.4%, quarterly while the Pending Home Sales for June eased and weekly Jobless Claims also jumped.

Other than the data, chatters over US President Joe Biden’s infrastructure spending also favored the market’s mood.

Moving on, gold’s further upside hinges on its break of the $1,835 monthly high, as it has already crossed the 200-DMA level of $1,821, before reaching the $1,845 hurdle.

End of the US session wrap.

After closing in the positive territory on Wednesday, gold preserved its bullish momentum and reached its highest level in two weeks at $1,832 before going into a consolidation phase. As of writing, the XAU/USD pair was up 1.35% on a daily basis at $1,831.

On Wednesday, the greenback came under strong bearish pressure after FOMC Chairman Jerome Powell adopted a patient tone regarding the beginning of asset tapering. Although Powell acknowledged that inflation was currently above desired levels, he reiterated that temporary factors were behind rising price pressures. Reflecting the broad-based USD weakness, the US Dollar Index (DXY) closed the third straight day in the negative territory.

During the first half of the day on Thursday, the USD struggled to find demand and the disappointing macroeconomic data releases caused the currency to continue to weaken in the American session.

The US Bureau of Economic Analysis announced that the US economy grew at an annualized rate of 6.5% (first estimate) in the second quarter. This reading followed the 6.4% expansion recorded in the first quarter and came in worse than the market expectation of 8.5%. Other data from the US revealed that there were 400,000 Initial Jobless Claims in the week ending July 24, compared to analysts' estimate of 380,000. Finally, the US National Association of Realtors reported that Pending Home Sales declined by 1.9% in June. Currently, the DXY is trading at its lowest level in a month at 91.90, losing 0.4% on the day.

On Friday, the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, will be looked upon for fresh impetus. The Core PCE Price Index is expected to rise to 3.7% on a yearly basis from 3.4% in May. A stronger-than-expected reading could help the USD limit its losses but the Fed seems certain that inflation will come back down eventually and the market reaction is likely to remain short-lived.

Gold technical outlook

On the daily chart, the Relative Strength Index (RSI) indicator rose to 60 on Thursday, suggesting that the bullish momentum is still intact and there is more room on the upside before XAU/USD become technically overbought. Additionally, gold looks to close above the 200-day SMA for the first time since mid-June, confirming the bullish bias. 

On the upside, the initial resistance is located at $1,834 (July 15 high) ahead of $1,845 (May 10 high) and $1,860 (Fibonacci 23.6% retracement of April-June uptrend). 

Supports, on the other hand, are located at $1,830 (50-day SMA), $1,820 (200-day SMA) and $1,800 (psychological level, 100-day SMA and Fibonacci 50% retracement).

GBP/JPY eases below 153.00 as Brexit, covid updates test bulls

• GBP/JPY steps back from 13-day top, under pressure of late.
• UK, EU warned over NI protocol deadlock even as policymakers brace for further talks.
• UK’s daily infections rise for second day but weekly count falls 22%, Japan braces to take more prefectures under emergency.

GBP/JPY justifies the previous day’s Doji candlestick formation with a pullback to 152.85 ahead of Friday’s Tokyo open.

The cross-currency pair jumped to the highest since July 13 on Thursday after Brexit optimism and weaker yen favored bulls. However, fresh chatters over Brexit and coronavirus tames the prior risk-on mood.

“The UK and EU have both taken a ‘fundamentally flawed’ approach to the Northern Ireland Protocol, a House of Lords committee has concluded,” said the BBC. Before that, the British and European Union (EU) policymakers were optimistic over holding further negotiations to tackle the Northern Ireland (NI) protocol issue.

Elsewhere, Britain’s 31,117 daily coronavirus cases mark the second day of increase but fall 22% during the last seven days. Alternatively, Japan’s covid numbers cross the 10,000 mark for the first time and push the policymakers to re-think emergencies in more prefectures. Japan’s Kyodo News quotes anonymous government sources in this regard while saying, “The government is planning to add three prefectures neighboring Tokyo, as well as Osaka Prefecture, to areas under the COVID-19 state of emergency amid a resurgence of the coronavirus.”

On a different page, downbeat US data backed the market’s hope for further stimulus, favoring the risk-on mood. Also backing the optimism is the current talks over US President Joe Biden’s infrastructure spending plan in the American Senate.

Amid these lays, S&P 500 Futures drop 0.35% after rising around half a percent to refresh the record top on Wall Street.

Looking forward, Japan’s preliminary reading of June’s Industrial Production and Retail Sales for May can entertain the pair traders. However, qualitative catalysts are more important for fresh direction, likely towards the south.

Technical analysis

A Doji on the daily chart below 50-DMA, near 153.55, suggests further pullback of GBP/JPY. However, 100-DMA tests intraday sellers around 52.60.

EUR/USD rises further to three-week highs, eyes 1.1900

The EUR/USD is rising for the fifth consecutive day on Thursday, boosted by a decline of the US dollar across the board. It is trading at 1.1890, at the highest level since July 6, on its way to the best week in three months.

During the American session, the US dollar dropped, further supporting the upside in EUR/USD. Economic data from the US contributed to the decline. Growth during the second quarter came in at 6.5%, below the 8.5% expected; initial jobless claims fell to 400K, a reading worse than consensus; and pending home sales declined 1.9% in June against expectations of a modest increase.

Economic figures added fuel to the slide of the greenback that started on Wednesday following the FOMC meeting. The DXY is down by 0.41%, at 91.90, the lowest level in a month. At the same time, US yields are hovering around recent levels. Equity prices are up in Wall Street. The Dow Jones gains 0.55% and the Nasdaq 0.45%. The risk-on environment weighs on the dollar.

The EUR/USD is looking at the 1.1900 area. Currently is testing the 1.1890 resistance area and a break higher should lead to further gains above 1.1900. The next resistance stands at 1.1920/25. The positive tone is likely to remain intact while above 1.1840; the next support is the 20-day moving average at 1.1820.