The Federal Reserve surprised the market by maintaining interest rates at 5.00-5.25% but raising the projected terminal rate in the Dot Plot by 50 basis points. The Fed's reasoning to pause at this meeting was to gather more economic data before considering another potential rate hike in July. This cautious approach is supported by the weaker details in the latest NFP report and the continuing disinflation in the latest CPI report, although the core readings remain persistently high.
During the press conference, Fed Chair Powell mentioned that the July meeting is "live," although he refrained from making any firm commitments. Overall, this demonstrates the Fed's willingness to take further measures to address high inflation, but their actions will ultimately depend on the economic data.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold has broken below the trendline and it’s now threatening a breakout of the key 1934 support. This may turn easily in a fakeout if today’s economic data misses across the board as that would make the market to price in some dovishness and help to lift gold.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is probing below the support level as the more hawkish than expected FOMC event yesterday weighed on gold. The buyers are likely to pile in here to defend the level and target the resistance at 1984, while the sellers will keep on pushing to confirm the breakout and extend the selloff into the 1800 level.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the short term price action and we can notice that there are multiple rejections as the buyers are trying hard to void the breakout. We might see this ranging price action until the economic data release today, which is likely to confirm or invalidate the breakout.
Today, we have two important reports: the US Jobless Claims and Retail Sales. Tomorrow, the focus will shift to the University of Michigan Consumer Sentiment survey. Another big miss in Jobless Claims could potentially be concerning for the market, indicating a rapid deterioration in the labour market and bring rates expectations down ultimately lifting gold. Conversely, if the figures beat expectations, it should result in more hawkish pricing and lead to the downside breakout. Additionally, market participants will be keen to observe a decrease in long-term inflation expectations in tomorrow's UMich report. A higher reading might suggest a de-anchoring of inflation expectations, which could raise concerns and lead to a more hawkish rates pricing.
