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XAU/USD Current price: 2,050.48
- The US Dollar came under strong selling pressure following signs of easing price pressures.
- The United States Federal Reserve will soon announce its decision on monetary policy.
- XAU/USD trades near a fresh two-week high, aims to extend gains in the near term.
The US Dollar is under strong selling pressure as the Federal Reserve’s (Fed) monetary policy decision approaches, with XAU/USD advancing beyond $2,050 a troy ounce. The Greenback slid after the release of United States (US) employment-related figures, signaling inflationary pressures eased further.
On the one hand, the ADP National Employment Report showed that the private sector added 107K new positions in January, below the market expectations. ADP Chief Economist Nela Richardson noted: “Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay,” adding that “the economy looks like it’s headed toward a soft landing in the US and globally.”
At the same time, the country released the Q4 Employment Cost Index, which showed wages and benefits increased 0.9% in the three months to December, down from 1.1% in the previous quarter and the smallest advance in over two years. Government bond yields plunged with the news, with the 10-year Treasury note offering 3.95% and the 2-year note yielding 4.12%, shedding over 10 basic points (bps) each.
The focus shifts now to the Fed. The central bank will shortly announce its decision on monetary policy, which is widely expected to remain unchanged. Ahead of the event, investors are pricing in a 60% chance of a rate cut in March and will be looking for confirmation despite Chair Jerome Powell likely refraining from providing a specific date. The US Dollar may come under additional selling pressure if Powell’s words are seen as dovish.
XAU/USD short-term technical outlook
The XAU/USD pair keeps gaining bullish traction, trading near a fresh two-week high. Technical readings in the daily chart favor another leg north, as the bright metal extends its recovery above a now flat 20 Simple Moving Average (SMA), while the longer ones slowly gain upward traction far below the current level. Finally, technical indicators advance within positive levels for the first time this year.
The 4-hour chart also favors the upside. Technical indicators turned higher and maintain their upward momentum well into positive ground. Furthermore, XAU/USD run past all its moving averages, while the 20 SMA crossed above a flat 100 SMA, both below and also bullish 200 SMA.
Support levels: 2,038.90 2,022.60 2,007.20
Resistance levels: 2,056.10 2,071.30 2,085.40
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