Hawkish Fed talk bearish for XAUUSD
Higher likelihood of four rate hikes in 2018 is bearish for gold. Will XAUSD continue declining?
Fed Chairman Powell said the US economy is strengthening and the “inflation is moving up to target” with “continued strength around the globe” in his Tuesday testimony before the House Financial Services Committee. The comments were interpreted by market participants as suggesting the policy makers may raise interest rates more aggressively than previously thought. The likelihood of four rates increases in 2018 rose to 33% Tuesday from about 20% on Monday as Treasury yields rose, according to CME Group’s FedWatch data. It now stands at 23.9%. Increased likelihood of four rate hikes in 2018 is bearish for gold.
The XAUUSD: D1 is retracing lower after hitting 19-month high in mid-January on the daily chart. It has breached below the 50-day moving average MA(50).
- Parabolic indicator gives a sell signal.
- The Donchian channel indicates downtrend yet: it is tilted lower.
- The MACD indicator is below the signal line and the gap is widening, this is bearish.
- The Stochastic oscillator is rising and has not reached the overbought zone.
We believe the bearish momentum will continue after the price closes below the lower Donchian boundary at $1302.66. A pending order to buy can be placed below that level. The stop loss can be placed above upper Donchian bound at $1361.58. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop loss level ($1361.58) without reaching the order ($1302.66), we recommend canceling the order: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
|Sell stop||Below 1302.66|
|Stop loss||Above 1361.58|
Market Analysis provided by IFCMarkets