XAU/USD Current Price: $2,582.67
- Investors are awaiting the Federal Reserve's announcement and its first interest rate cut in four years.
- U.S. Treasury yields fell to new annual lows, weighing on the US dollar.
- XAU/USD has retreated slightly from its all-time highs, but bullish potential remains.
Gold prices hit a new record high of $2,589.50 per troy ounce on Monday before slipping slightly from that level and now trading around $2,582.00 in the US market. XAU/USD surged during Asian trading hours, supported by a recovery in the Japanese Yen (JPY), putting pressure on the US Dollar against all major currencies.
The USD/JPY pair has fallen to its lowest in over a year as investors focus on the interest rate differential between the US and Japan, with the central banks of the US and Japan due to announce their monetary policy this week. The US Federal Reserve (Fed) is widely expected to cut its benchmark interest rate by 25 basis points (bps) on Wednesday, while the Bank of Japan (BoJ) is likely to move in the opposite direction on Friday. The US Dollar has also fallen in anticipation of the Fed announcement, as the central bank is likely to make a larger interest rate cut.
Meanwhile, U.S. Treasury yields are hovering near their lowest levels in months, with the 10-year note currently yielding 3.63% and the 2-year note yielding 3.55%, both two-year lows.
XAU/USD Short-Term Technical Outlook
The XAU/USD pair has maintained a small uptrend throughout the day, with technical indicators on the daily chart indicating risks are tilting to the upside, but momentum is fading. The pair has finally detached itself from the bullish 20 Simple Moving Average (SMA) and is currently at around $2,517. The 100 and 100 SMA are trending up much lower than the shorter ones, reflecting sustained buying interest. Finally, technical indicators have turned sideways but remain well within the positive territory.
In the short term, according to the 4-hours chart, XAU/USD seems poised to correct from its overbought condition. Technical indicators are retreating from extreme levels in a gradual downward trend, which is not enough to predict a sharp decline. Meanwhile, the solid bullish 20 SMA is steadily rising in the $2,550 region, much higher than the longer one which is also rising.
Support Levels: 2,575.20 2,563.60 2,550.00
Resistance Levels: 2,590.00 2,605.00 2,620.00
