- Markets offer a mixed reaction to the Minutes and gold is steady.
- The US dollar is on the verge of a critical move towards daily resistance.
- Gold's bearish Doji and the confluence of resistance leaves the bias bearish.
Tokyo session update:
The price of gold is sat in a tight range and slightly down in the day by 0.13% as the US dollar perks up towards a critical resistance zone on a longer-term basis, reversing the sell-off post-FOMC minutes.
The greenback retreated from 4-1/2-month highs to trade little changed on Wednesday after minutes of last month's Federal Reserve meeting suggested there was no consensus about the timing of a tapering of its asset purchases under the US central bank's quantitative easing program.
The minutes also said most participants "judged that the Committee's standard of 'substantial further progress' toward the maximum-employment goal had not yet been met."
The lack of urgency sent US yields a touch lower along with the greenback.
US yields ended around flat on the day. The 2-year government bond yields traded at 0.22%, and 10-year government bond yields traded at 1.26%.
However, in recent trade, the DXY has perked up with the 93.43 critical level on sight as the price trades at 93.324 at the time of writing.
Gold bears looking for a break of 1,780 for the coming hours.
End of update.
The minutes of the prior Federal Open Market Committee meeting for July 27-28 have been released and have shown that officials felt recent inflation readings likely temporary but most they feel it could be appropriate to start tapering the asset purchases this year.
In response, the US stock market is sinking towards the lows of the day, US yields and the US dollar are being pressured with the greenback moving in on the psychological round 93.00 level in the DXY and gold prices are supported.
At the time of writing, XAU/USD is trading at $1,784 and has been holding in a range of between $1,777.43 the low and $1,7933.83 the high.
It is a mixed reaction to minutes that, on one hand, underpin the hawkish message at the Fed and the need to monitor risks in economic data that could lead to higher and longer than expected inflation.
On the other hand, the minutes outline the importance of ensuring that there should be no link between tapering and the timing of rate rises:
''Many participants noted that, when a reduction in the pace of asset purchases became appropriate, it would be important that the Committee clearly reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate,'' the minutes stated.
However, the minutes do not signal that there was an imminent need to taper which potentially leaves the Jackson Hole as the market's wild card still; It is still no clearer if a taper announcement will be made at the event.
''Fed officials have increasingly been pointing to tapering starting before too long, with many hawks making the case for a formal tapering announcement in September. However, the hawks appear to be a vocal minority with many more, most likely including the Chair, favouring waiting until at least November before announcing taper,'' analysts at TD Securities explained.
The trajectory of the US dollar and yields around the event will be critical for the precious metals markets and a headwind for the bulls in bullion.
For the time being, however, the US dollar can remain bid against most major currencies due to the concerns about the global economy that has forced investors to seek safety in the greenback.
Additionally, the greenback has been thrown a lifeline in the recent dovishness at the Reserve Bank of Australia as well as the Reserve Bank of New Zealand which underscores the divergence between the Fed and other global central banks.
The US dollar smile theory is still something that is very much in play and the DXY is embarking on a critical level of technical resistance confluence on the longer-term, charts, a break of which could lead to some serious upside for the greenback.
Meanwhile, analysts at TD Securities argue that ''the balance of risks for the complex may have been altered as the latest positioning data highlights that the technical breakdown fueled a substantial accumulation of shorts, with central banks and physical buyers likely to have been on the bid.''
''In response to the sharply stronger price action thereafter, CTAs are likely to cover shorts in gold, creating additional upside flow.''
Gold technical analysis
The death cross is regarded as a bearish moving average formation with the 50 moving below the 200 DMA.
However, since October 2001, selling gold after a death cross has failed more than it has succeeded.
Meanwhile, the Bearish Doji Star appears in an uptrend and belongs to the bearish reversal patterns group.
The prior day's Doji candle formation, as well as today's forming Doji, could be the catalyst for supply in the coming days.
However, traders will be looking for additional confirmation such as a subsequent break below the 10 EMA and confluence of the 4-hour support of 1,770.
Meanwhile, a break of resistance opens risk back into the 1,800s.
However, failures will likely lead to a downside continuation of the broader bearish trend to target the 50% mean reversion and the confluence of the 200-day Smoothed MA near 1,755 and then 1,677 daily swing lows will be key in this regard.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds steady near 0.6250 ahead of RBA Minutes
The AUD/USD pair trades on a flat note around 0.6250 during the early Asian session on Monday. Traders brace for the Reserve Bank of Australia Minutes released on Monday for some insight into the interest rate outlook.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold price bulls seem non-committed around $2,620 amid mixed cues
Gold price struggles to capitalize on last week's goodish bounce from a one-month low and oscillates in a range during the Asian session on Monday. Geopolitical risks and trade war fears support the safe-haven XAU/USD. Meanwhile, the Fed's hawkish shift acts as a tailwind for the elevated US bond yields and a bullish USD, capping the non-yielding yellow metal.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.