The pair continues to trade above the 2300.0 level, supported by several factors, with the rhetoric from US Federal Reserve (Fed) members being a major highlight.
With the Fed transitioning to looser monetary policy, as indicated by the Chicago Mercantile Exchange (CME) FedWatch tool, there is an 8.3% chance of a rate cut at the July 31 meeting. By the September meeting, the expectation of a cut increased from 21.0% to 38.5%, influenced by the speeches of regional department heads. Recently, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, stated that the Federal Reserve's new plan only foresees a reduction in borrowing costs this year, conditional on inflation and labor market forecasts. As a result, investors are bracing for a prolonged period of high benchmark rates, favoring safe-haven assets such as gold.
Another reason for the possible increase in precious metal prices is the stock market correction. Since the beginning of June, the yield on the major 10-year US Treasury bonds has fallen from 4.610% to 4.273%, making them less attractive compared to late spring. However, when evaluating the trading volumes of gold contracts on the CME, there are no signs of significant growth, with around 170 thousand contracts traded against 300 thousand at the end of May.
Support and resistance levels
On the daily chart, the trading instrument is correcting within the lateral channel with limits between 2430.0 and 2290.0.
Technical indicators are softening the sell signal: the fast EMAs on the Alligator indicator are close to the signal line and ascending bars are forming below the transition level on the AO histogram.
Resistance Levels: 2340.0, 2420.0
Support Levels: 2290.0, 2220.0
Business scenarios
Long positions: can be opened after the price rises and consolidates above the level of 2340.00, with a target of 2420.00. Place Stop Loss order at 2300.00. Term: 7 days or more.
Short positions: They can be opened after the price falls and consolidates below the level of 2290.00, with a target of 2220.00. Place Stop Loss order at 2330.00.
