XAU/USD Current price: $1,955.89
- Hopes the US will extend its debt ceiling maintain markets in risk-on mode.
- Federal Reserve officials surprised investors with hawkish words.
- XAU/USD bearish run far from over, with a test of $1,900 on the cards.
Spot Gold extends its bearish route, so far bottoming on Thursday at $1,951.92 a troy ounce, its lowest since April 3. Financial markets kick-started the day with optimism amid news about extending the United States (US) debt ceiling. Still, the US Dollar retained its former strength, gaining further ground during the American session amid a deteriorated mood coupled with upbeat US data.
On the one hand, House Speaker Kevin McCarthy said a debt limit deal will be on the House floor next week, adding that he now sees a deal coming together. On the other, Federal Reserve (Fed) speakers came out with some hawkish surprises. Dallas Fed´s President Lorie Logan noted that data at this time does not support skipping an interest rate hike at the next meeting in June. She added that the central bank still has work to do to achieve its goal of price stability.
Additionally, Fed Governor Philip Jefferson said that inflation remains too high and mentioned the lagged effects of monetary policy. On a positive note, he added that he expects that a “slowing economy will soon begin to reduce job growth, with labor supply and labor demand coming into better balance.”
Data-wise, the US published Initial Jobless Claims for the week ended May 12, which increased by 242 K, beating the 254K expected and decreasing from 264K in the previous week. Also, the May Philadelphia Fed Manufacturing Survey printed at -10.4, improving from -31.3 in April and better than the -19.8 anticipated by financial markets. Finally, Existing Home Sales declined 3.4% MoM in April, worse than the 0.1% advance expected.
At the time being, US indexes trade mixed. The Dow Jones Industrial Average is down around 130 points, while the Nasdaq Composite is the best performer, up 0.78%. The S&P 500, in the meantime, holds on to modest gains and hovers around 4,173. Finally, US Treasury yields recovered their bullish tone, with the 10-year note yielding 3.64% and the 2-year note 4.23%, underpinning the Greenback.
XAU/USD price short-term technical outlook
XAU/USD is down for a third consecutive day and trades near the aforementioned low. The pair is developing below a mildly bearish 20 Simple Moving Average (SMA), while the longer moving averages maintain their bullish slopes below the current level. Technical indicators, in the meantime, head firmly south within negative levels, reflecting prevalent selling interest.
XAU/USD is oversold in the near term. In the 4-hour chart, technical indicators stand at extreme levels, partially losing their bearish strength but without anticipating a potential bounce. At the same time, the bright metal trades far below all its moving averages, and with the 20 SMA heading firmly south below the longer ones.
Support levels: 1,944.00 1,932.10 1,918.70
Resistance levels: 1,958.30 1,972.20 1,985.95
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