Gold bulls face a challenge as the dollar index (DXY) is at a high

GOLD PRICE FORECAST:

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Gold prices they remain under pressure on the back of the flexible material Dollar Index (DXY). The strength of the dollar can be caused by a number of factors such as FOMC meeting approaches. Gold prices We seem to need a catalyst at this stage with the new range seemingly settled between the $1950 and $1980 handle.

Refinitiv survey at the July FOMC meeting

* 106 economists interviewed; all will see a 25 bps hike at tomorrow’s meeting

Source: Refinitive

FOMC MEETING, DXY AND US PCE DATES

The Dollar Index (DXY) came under mild selling pressure in the Asian session as hopes for a initiative The package in China helped sentiment and weighed on the safe haven American dollar. However, the European Open saw those losses erased as the DXY marches higher ahead of the highly anticipated FOMC meeting. The DXY’s strength can be attributed in part to the repositioning and potential profit-taking after last week’s selloff.

Tomorrow’s FOMC meeting could be the catalyst gold prices need to advance. Market participants are largely resigned to a 25 basis point hike by the Fed, which should not move markets as much as it appears to be already. As was the case recently at the press conference until Fed Chair Powell is likely to hold the key to market sentiment development as well as any adjustments to the Fed’s outlook for the rest of 2023. Positive signals on the inflation front bode well for another Fed pause, which could see the DXY pull back and help push gold prices higher. In my humble opinion, it would take extremely hawkish comments from the Fed chairman DXY to maintain its current upward momentum with my gut leaning on the side of dollar weakness FOMC.

At the end of the week, the Fed will take another look at its favorite inflation gauge with Core PCE data scheduled for release. It’s been an interesting run for 2023 PCE data with 3 consecutive months of decline followed by an increase in April. A further decline this month will follow a decline in May, with the below-estimated print adding further selling pressure to the stock market DXY.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

Create a technical view, Gold prices appear poised for further growth despite the recent decline from highs around $1987/0z. On the daily time horizon, a candle just below the $1952 mark would see a change in structure and increased bearish pressure on gold prices.

Yesterday’s US session and gold appeared poised for renewed upward pressure as it found support around the currency 100 day MA. However, the continued strength of the DXY has pulled gold prices lower, hovering between the 50 and 100 daily MAs. There is a strong likelihood that gold will remain trapped between these two MAs hovering around $1963 and $1947 ahead of tomorrow’s FOMC meeting.

Gold (XAU/USD) Daily Chart – July 25, 2023

Source: TradingView, Chart Prepared by Zain Vawda

The Dollar Index (DXY) will be key to gold’s direction in the coming days and weeks. A recent rally after a dip below psychological grade 100.00 he seems to be running out of steam.

With that in mind and tomorrow’s FOMC meeting, dollar bulls will be hoping for some form of hawkish comments from Fed Chair Powell to move the rally towards resistance at the 102:00 handle. A break of this level, if the DXY continues to advance, would bring 50 and 100 day MA to the focus resting around the 102.50 handle which rests in the gap between the 61.8-78.6 fiber retracement levels. This confluence area, if reached, could serve as a strong resistance area facilitating a broader downward move for the dollar index.

Dollar Index (DXY) Daily Chart – July 25, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda