Data released this week by the US Bureau of Labor Statistics suggests that the Fed's more aggressive policy has been effective. Nevertheless, the rise in inflation in the US still continues, albeit at a slower pace.
Fed Chairman Jerome Powell on Thursday (on the radio program Marketplace) confirmed that the main task of the central bank is to regain control of inflation.
Powell once again said that if the economic performance is in line with expectations, then he considers it appropriate to raise interest rates by 50 basis points at the next two meetings.
With inflation still near 40-year highs, this suggests that the Fed will continue to be more aggressive in the future.
Well, since the divergence between the conditional curves of the monetary policies of the Fed and other major world central banks will increase, we should expect further strengthening of the dollar and, accordingly, the growth of the DXY dollar index. It is likely that soon it will break through the level of 105.00 and head towards the 110.00 mark (at these levels, futures for the DXY dollar index were traded 20 years ago).
Meanwhile, against the backdrop of a strengthening dollar, gold quotes and, accordingly, the XAU/USD pair are falling. In the current situation, it seems that when assessing the possibility (or necessity) of investing in this precious metal, investors put the Fed's policy first, relegating geopolitical and inflationary risks to the background, also preferring the dollar as a protective tool.
At the time of publication of this article, the XAU/USD pair is trading near the 1821.00 mark. The lower limit of the descending channel on the daily chart is between 1800.00 and 1785.00. The last time XAU/USD was near these levels was in February, before the price surged up to a multi-year high of 2070.00 dollars per ounce. If the downtrend continues, and everything goes exactly to this, then the levels of 1800.00 and 1785.00 are likely to become the nearest downside targets for XAU/USD.
Support levels: 1800.00, 1785.00, 1738.00, 1700.00, 1682.00, 1675.00
Resistance levels: 1832.00, 1857.00, 1860.00, 1870.00, 1898.00, 1918.00, 1958.00, 2000.00, 2070.00, 2075.00
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