Last updated on July 2nd, 2019 at 03:20 pm
Gold Weighed by a Strong Dollar
The sharp reversal in gold prices last week happened after the US retail sales report triggered a turn higher in the greenback. This caused a significant fall in the price of gold that resulted in a flat week after it traded at levels not seen in over a year.
There is some significant overhead resistance in play and that can keep a lid on any rally attempts over the next day or two. I suspect volatility will pick up after the Fed meeting which will take place on Wednesday.
To see a detailed analysis of the overhead hurdle, have a look at the weekly gold price forecast.
Technical Support in Play
The weekly forecast had called for two support levels and we’ve reached the first one. It is a horizontal level at $1332. Currently, it carries some confluence with the 100-hour moving average.
Momentum has slowed significantly on approach to this support confluence although it is expected to pick up once US traders get to their desks.
For the session ahead, upside resistance is found at $1337. It marks a horizontal level that has acted as both support and resistance in recent times. There’s some potential for a range to play out as the markets await Wednesday’s Fed meeting.
The Dollar Index is at Resistance
The dollar has been rising with momentum but is seen approaching some resistance ahead of today’s North American session. The US Dollar index (DXY) seems to be consolidating just below the resistance zone found between 97.50-97.60.
This area has held several rallies from the fourth quarter of 2018 until the first quarter of 2019. Also, the 61.8% Fibonacci retracement, measured from the May high to recent lows, is within close vicinity.
We may see some positioning to front run the Fed meeting, although sentiment has soured since Friday’s Fed meeting. There is no longer much hope for a rate cut this week, but the markets remain convinced that there will be at least two by the end of the year.
That’s according to the futures markets at least. Take a look at the CME Fed Funds Tool to keep a track of the latest probabilities on interest rate fluctuations.