XAU/USD - FED decision - fundamentals and technicals
In this chart I will be showing the major trend lines and significant higher time frame sell zone which we should look to enter sell positions into the market expecting a push down to the low 1800s over the next 2 weeks. First let me explain this weeks fundamental drivers.
Important news this week includes the Bank of Canada interest rate decision which is supposed to remain the same at 0.25% despite a more hawkish tone on Wednesday. Later on Wednesday the FED will be announcing their interest rate decision which the market has priced in as being increased from 0.25% to 0.5% despite the forecast being that the FED will not increase the interest rate. We should expect to see a larger fall in gold if the FED do increase their base rate from 0.25% to 0.5% tomorrow rather than holding off till March to increase the rate. Gold is bearish as an increased interest rate is bullish for the dollar, which puts downside pressure on gold as it is now relatively cheaper when priced in dollars. Gold is also seen as an inflation rate hedge therefore if the market expects this 25 basis point increase to combat inflation then the demand for gold will also decrease. The bullish motives for gold are that a risk-off market sentiment is will increase buying pressure for gold as recession fears could drive gold higher if the market goes into a panic or fear mode, this is not what the FED is trying to cause though.
Now for the technicals:
I expect higher time frame sell orders to be input into the market above the 1856 area in line with the 4 hour and daily chart of downwards pressure indicated by the grey line. I expect high volatility so a short wick up into a better risk reward sell area would be to sell between 1864 and 1868. Use a tight stop say at 1872 and target 1820. I really am bearish on gold so will be looking to enter into a sell which I will hold until gold prices reach the 1820 area. All the relevant trend lines are indicated on the chart.
Expect volatility tomorrow so please trade carefully. To note, I am bullish until the 1860 zone so wait for price to increase to this level before inputting sells for better risk reward.
Important news this week includes the Bank of Canada interest rate decision which is supposed to remain the same at 0.25% despite a more hawkish tone on Wednesday. Later on Wednesday the FED will be announcing their interest rate decision which the market has priced in as being increased from 0.25% to 0.5% despite the forecast being that the FED will not increase the interest rate. We should expect to see a larger fall in gold if the FED do increase their base rate from 0.25% to 0.5% tomorrow rather than holding off till March to increase the rate. Gold is bearish as an increased interest rate is bullish for the dollar, which puts downside pressure on gold as it is now relatively cheaper when priced in dollars. Gold is also seen as an inflation rate hedge therefore if the market expects this 25 basis point increase to combat inflation then the demand for gold will also decrease. The bullish motives for gold are that a risk-off market sentiment is will increase buying pressure for gold as recession fears could drive gold higher if the market goes into a panic or fear mode, this is not what the FED is trying to cause though.
Now for the technicals:
I expect higher time frame sell orders to be input into the market above the 1856 area in line with the 4 hour and daily chart of downwards pressure indicated by the grey line. I expect high volatility so a short wick up into a better risk reward sell area would be to sell between 1864 and 1868. Use a tight stop say at 1872 and target 1820. I really am bearish on gold so will be looking to enter into a sell which I will hold until gold prices reach the 1820 area. All the relevant trend lines are indicated on the chart.
Expect volatility tomorrow so please trade carefully. To note, I am bullish until the 1860 zone so wait for price to increase to this level before inputting sells for better risk reward.