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XAUUSD – Technical Outlook


US Fed Interest Rate Decision

Federal Open Market Committee (FOMC) members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation. Hikes are required if the Fed is to reach its goals.

The Fed has increased rates 8 times in 2022, the last rate hike in December was 50 bps. Interest rates are currently set at 4.50%.

The report is due Wednesay, 1 February 2023, at 19:00 GMT.

Technical Analysis Daily Timeframe

Moving Average(MA):

In the Daily timeframe, XAU/USD price is currently trading above both the 200 and 50 moving averages, meaning the higher time, the market is shows bullish pressure.

Relative Strength Index(RSI):

The RSI line is at 57.21, which indicates slight overbought condition. There is a bearish RSI divergence seen meaning the bearish moment is due.

Analysis using price action:

XAU/USD was in a consolidation state on the daily time frame until 10th Dec 2022, when the market broke above the resistance forming a new high at $1785.15. Since then, the market has been trading inside a bullish channel forming higher highs and lows. After breaking up the range zone, the price went up to 12.68%, forming a high at $1948.09.

On the way to the high formation, the market formed a golden cross with 50MA crossing above the 200MA. Just after the golden cross formation, there was a bearish RSI Divergence formation on the chart signaling the bearish move is due.

While the major resistance is at $1948.62, the support is at $1908, which the price is now trying to break. If the price successfully breaks below the $1908 region and the price starts to form two consecutive lower highs and lows, the market may expect a downward movement. However, if the price fails to do so and instead breaks above the resistance at $1948.62, it may continue to trade up as the overall trend is an uptrend.

Potential pivot points using Price Action:

Resistance PivotSupport Pivot

This considerable resistance and support level can enter or exit when approaching future market openings.

Key Trading Recommendation

Investors are expecting a lower rate increase, perhaps around 25 bps since inflation has cooled down slightly the projection is that the Fed will take a less hawkish stance this year. However, the peak has not yet been reached with estimates for interest rates to reach 5.75% if the Fed is targeting a 2% inflation level.

Traders should avoid entering positions during these news events since the market will have higher-than-average volatility, meaning that currencies could move in either direction without a definite trend for a short while.

Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.

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