Falling wedge lures XAU/USD bulls as US Dollar drops on mixed data, softer yields

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• Gold Price grinds higher after bouncing off the lowest level in three months.
• Pullback in United States Treasury bond yields, mixed US data weigh on US Dollar and propel XAU/USD.
• ECB rate hike versus hawkish Fed halt, China news also down US Dollar, favoring the Gold Price in turn.
• US Michigan Consumer Sentiment Index, Inflation expectations eyed for intraday XAU/USD directions.

Gold Price (XAU/USD) dribbles near $1,958-59 during early Friday after a volatile day that initially refreshed a multi-day low before bouncing off $1,924, as well as posted snapping the four-day losing streak. That said, the XAU/USD previously dropped to the three-month low as the US Dollar licked Federal Reserve (Fed) inflicted wounds amid hopes of a July rate hike before cheering the USD weakness on downbeat data and the market’s cautious optimism to recover from the lowest level since March.

Gold Price rebound relies on US Dollar weakness

Gold Price portrayed a perfect contrasting play with the US Dollar as the XAU/USD initially refreshed the monthly low on the greenback’s recovery amid hopes of a July rate hike from the Federal Reserve (Fed) before downbeat US data weighed on the yields and the USD.

That said, the US central bank kept the benchmark interest rate unchanged at 5.0-5.25%, matching market expectations of pausing the multi-month-old hawkish cycle after 10 consecutive rate increases. However, the upbeat FOMC Economic Projections and Federal Reserve (Fed) Chairman Jerome Powell’s speech backed the hawkish Fed bias surrounding the July meeting and weighed on the Gold Price on early Thursday, before bouncing off $1,924.

On the other hand, Thursday’s United States statistics haven’t been impressive and hence pushed back the July rate hike concerns, which in turn joined other risk-positive catalysts to weigh on the US Dollar and propel the Gold Price.

On Thursday, US Retail Sales growth marks an increase of 0.3% for May versus -0.1% expected and 0.4% previous readings while the Core readings, means Retail Sales ex Autos, match 0.1% market forecasts for the said month, compared to 0.4% prior.

Further, NY Fed Empire State Manufacturing Index jumps to 6.6 in June versus -15.1 expected and -31.8 prior whereas Philadelphia Fed Manufacturing Index drops to -13.7 for the said month from -10.4 prior and compared to -14 market forecasts.

Additionally, US Industrial Production for May cools down to -0.2% against 0.1% estimated and 0.5% prior while Initial Jobless Claims reprints the upwardly revised figures of 262K for the week ended on June 09 versus 249K expected.

Apart from the US data, the European Central Bank’s (ECB) 25 basis points (bps) interest rate hike and clues of more such moves ahead also weighed on the US Dollar.

Elsewhere, the People’s Bank of China (PBoC) cut its one-year interest rate for the first time in 10 months, by 10 basis points (bps), which in turn unleashed hopes of more liquidity in one of the world’s biggest Gold consumer and favor the metal price. It should be noted that downbeat prints of China Retail Sales and Industrial Production and fears of labor problems in Beijing-based factories prod the XAU/USD bulls.

Amid these plays, market players portrayed an optimistic day with upbeat Wall Street performance and a steep fall in the US Treasury bond yields, not to forget the US Dollar Index (DXY) drop to the three-week low. The same offered the Gold Price the much-needed rebound to pare weekly losses inside a bullish chart pattern.

More clues to defy July Fed hike needed for clear XAU/USD direction

Although the latest United States data have been helpful to push back the concerns about the Federal Reserve’s (Fed) July rate increase, the CME’s FedWatch Tool still shows around a 67% chance of the US central bank’s 0.25% rate hike in the next month. Hence, more data rejecting the hawkish bias needs to defend the latest Gold Price rebound.

As a result, today’s preliminary readings of the Michigan Consumer Sentiment Index (CSI) for June and five-year inflation expectations will be in the spotlight. Also important to watch will be the US Treasury bond yields and the US Dollar moves.

Also read: Gold Price Forecast: XAU/USD could well rally on any data showing inflation pressures are easing – TDS

Gold Price technical analysis

Gold Price fades upside momentum within a fortnight-old falling wedge bullish chart formation.

Adding strength to the XAU/USD recovery hopes is the looming bull cross on the Moving Average Convergence and Divergence (MACD) indicator, as well as a U-turn by the Relative Strength Index (RSI) line, placed at 14, from the oversold territory.

It’s worth noting, however, that the 200-bar Exponential Moving Average (EMA) adds strength to the wedge’s top line and makes it harder to cross the $1,968 hurdle.

Also challenging the Gold Price upside is a one-month-old horizontal resistance zone surrounding $1,983-87.

Meanwhile, the stated bullish chart pattern’s lower line, close to $1,923 at the latest, precedes the mid-March consolidation around $1,910-15 to challenge the short-term XAU/USD downside.

Following that, the Gold Price downside towards the $1,900 threshold, $1,890 dynamic support and the early March swing high of near $1,858 will be on the XAU/USD bear’s radar.

Gold Price: Four-hour chart

Trend: Further downside expected