Gold bears cautious ahead of key support as hawkish Fed bets underpin dollar's corrective rebound after four-week downtrend

2023-04-10 16:55:59

Spot gold (XAU/USD) pared intraday losses around $1,995 during the Easter Monday holiday in major markets. In the process, gold bounced off its 200-period exponential moving average (EMA) but remained modestly quoted on the day, which in turn challenged sellers after posting its first weekly gain in three in the previous session Potential.

Risk aversion due to geopolitical tensions between the U.S. and China over Taiwan, along with a rebound in the U.S. dollar, put downward pressure on gold prices. The market's recent inaction has capped gold's near-term moves.

Elsewhere, better-than-expected U.S. non-farm payrolls data on Friday reignited hawkish bets on the Federal Reserve and suggested the U.S. central bank will raise interest rates by 0.25%, compared to expectations for no action. Investors expected a rebound in U.S. inflation data amid strong labor market conditions, boosting the dollar index to 102.23.

A slide in U.S. Treasury yields and overall U.S. weakness statistics also boosted dollar bulls and allowed gold buyers to hold on ahead of U.S. consumer price index (CPI) data and the minutes of the latest Federal Open Market Committee (FOMC) monetary policy meeting. hope.

Meanwhile, S&P 500 futures extended losses as the Federal Reserve is expected to raise interest rates further to rein in persistent inflation, reflecting a decline in risk appetite among market participants. Fed Chairman Jerome Powell is expected to raise interest rates above 5% as unemployment falls further. This could force companies to raise salaries to acquire new talent.

U.S. 10-year and 2-year Treasury yields remained under pressure around 3.37% and 3.95% respectively. In doing so, benchmark Treasury yields extended losses from the previous day, illustrating a rush for safety in risk amid fears of an economic slowdown.

For further guidance, Wednesday's U.S. inflation data will be closely watched. Gasoline prices continued to fall in March amid weak oil prices, and headline inflation is expected to decline moderately. Core inflation is expected to surprise upwards as average household wages are strong. The minutes of the Fed meeting will also be crucial for clear guidance afterwards.

Spot Gold Technical Analysis

On the hourly chart, gold prices are falling towards an uptrend line from the March 15 low. The precious metal fell below the $2,000 psychological support level.

The 20 and 50EMA formed a dead cross at $2011.43, indicating that the market outlook will extend the decline.

At the same time, the RSI fell into the bearish range of 20.00-40.00, indicating that the downside momentum remains.

Even so, the 200-period moving average and the former resistance line on March 20, around $1,990 and $1,982, respectively, could challenge gold prices to the downside before heading into a bear market.

In this case, the rising support line from March 22 at about $1958 will come into the sight of gold bears.

Meanwhile, recovery action remains elusive unless the 50-period moving average is breached around $2,007.

After that, resistance around the most recent high around $2,035 and the former support line around $2,040 from April 3 could test gold buyers.

If gold remains firm after breaking through $2040, the previous yearly high around $2070 and the all-time high hit in 2020 at $2075 will be in focus.

Spot gold one hour chart



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