Gold price (XAUUSD) experienced a minor upward correction since the post-NFP selling pressure. However, the upcoming high-impact release, with a potential bearish reversal price pattern, could make XAUUSD an attractive investment opportunity.
Strong NFP Supports Gold Bears
The increase in interest-rate expectations in the US is the major factor contributing to the decline in gold prices. The better-than-expected US jobs data released on Friday reduced the probability of the Federal Reserve (Fed) reducing interest rates in September, suggesting that inflationary pressures were still present. The opportunity cost of retaining non-yielding gold increases with interest rates, rendering it less appealing to investors.
According to CME FedWatch tool data, which employs 30-day US Fed Fund Futures pricing, market expectations for a September interest rate cut decreased from 67% to just over 50% after the NFP release. The current probability is approximately 54%.
Global Interest Rates Support Gold Bulls
Nevertheless, gold is supported by the more subdued outlook for global interest rates. The European Central Bank (ECB) and the Bank of Canada (BoC) both recently reduced their overnight rates by 0.25% to 4.75%. A decrease in inflation data in Switzerland has prompted speculation that the Swiss National Bank (SNB) may further reduce interest rates at its June 20 meeting, following an initial reduction in March.
Gold traders anticipate the conclusion of the Federal Reserve's June meeting on Wednesday and the release of the US Consumer Price Index (CPI) data for May on the same day for additional price direction cues.
Gold Price Might Fluctuate From High-impact Releases
The Federal Open Market Committee (FOMC) is currently engaged in a two-day meeting, and the results are expected to be disclosed on Wednesday. Consequently, investors are eager to receive updates from US policymakers. It is widely anticipated that the Federal Reserve will maintain the Fed funds rate at 5.25%-5.50%, with no rate decreases anticipated until at least September. Inflation has slightly increased in the first quarter of the year, and the Fed's hawkish posture is expected to be maintained due to the tight labor market.
The US will release May CPI data before the FOMC announcement. The data is anticipated to reflect a 0.1% month-over-month increase and a 3.4% year-over-year increase, consistent with April's reading. Despite the Federal Reserve's predilection for the Personal Consumption Expenditures (PCE) Price Index when formulating monetary policy, these figures can potentially influence the foreign exchange market.
Gold Price Prediction Technical Analysis
The daily XAUUSD price trades sideways at the record high, from which a decent downside correction might happen after a valid trend reversal.
In the major structure, the 100-day Simple Moving Average is still below the current price and is working as a major support. However, the current dynamic level is below the 2278.13 level, suggesting a possible downside correction as a mean reversal.
On the other hand, the latest high volume level is above the current price, suggesting a selling activity from institutions.
Based on this outlook, a valid bearish reversal with a daily close below the 2278.13 level could validate the Head and Shoulders breakout. In that case, a strong downside momentum might target the 2145.21 support level.
On the other hand, a failure to have a stable market below the dynamic 100-day SMA with an immediate bullish reversal could resume the existing bullish trend, targeting the 2480.00 level.
