Basic Overview
Markets were waiting for the US non-farm payrolls report for a clear signal of a 25 or 50 basis point rate cut at the upcoming FOMC meeting, but instead we got a mixed report with some better details.
As a result, the odds of a 50bp rate cut have fallen and are now around 27%. Tomorrow’s weak US CPI report could increase the odds a bit, but we’ll still be heading for the FOMC decision with a 25bp rate cut as the most likely scenario.
In the bigger picture, gold is expected to remain supported as real yields decline due to the Fed’s rate-cutting cycle, but in the near term, strong or better US data may weigh on the market a bit.
Technical Analysis of Gold – Daily Time Frame
Gold daily
On the daily chart, we can see that gold is still stuck in the range between the support level of 2480 and the resistance level of 2530. We will need a strong catalyst to break out of the range and if it does not happen this week, it will definitely happen next week with the FOMC decision.
Gold Technical Analysis – 4 Hour Time Frame
Gold 4 hours
On the 4-hour chart, we can more clearly see the range between the support level of 2480 and the resistance level of 2530. Market participants continue to “play the range” by buying at the support level and selling at the resistance level waiting for a breakout on either side.
Technical Analysis of Gold – 1 Hour Time Frame
gold 1 hour
On the 1-hour chart, we can see that we have an interesting area around the 2506 level where the price has interacted with it several times in the past two weeks. This may act as a sort of sentiment gauge with aggressive traders taking long positions on a break above the level and sellers taking short positions around the level. The red lines mark the average daily range for the day.
Upcoming incentives
Today we have the US Small Business Optimism Index. Tomorrow we have the US CPI report. On Thursday we have the latest US jobless claims and US PPI data. On Friday we wrap up the week with the University of Michigan Consumer Confidence report.