• Gold price remains sidelined near nine-month high after a five-week uptrend.
• Mixed signals from Federal Reserve, mostly downbeat United States data improved sentiment and propelled Gold prices of late.
• Lunar New Year holidays in China, Fed’s ‘Blackout period’ may challenge XAU/USD traders.
• Purchasing Managers Indexes, Gross Domestic Product will be crucial for fresh impulse.

Gold price (XAU/USD) prints mild losses around $1,925 as bulls take a breather after a five-week uptrend, especially amid a lack of traders from China and the Federal Reserve’s (Fed) silence period. Even so, the bright metal stays near the highest levels since April 2022 as XAU/USD bulls await the first readings of activity data for January and the advanced estimates of the United States’ Gross Domestic Product (GDP) for the fourth quarter (Q4) 2022.

That said, the Gold buyers cheered upbeat sentiment and the US Dollar’s weakness, mainly due to China-inspired market optimism, softer data from the United States and mixed comments from the Federal Reserve (Fed) officials.

Gold price benefits from US Dollar weakness

US Dollar Index (DXY) holds lower ground at the lowest levels since May 31, 2022, tested the last week, even as the latest comments from the US Federal Reserve (Fed) officials ahead of a two-week ‘blackout period’ before the Fed meeting favored further rate hikes. The reason could be linked to the market’s belief that the Fed is near to the policy pivot even if it is all set to announce a 0.25% interest rate increase in the February meeting.

Federal Reserve Governor Christopher Waller was the last from the US central bank speakers to cross the wires before the stipulated mum-period ahead of the February Federal Open Market Committee (FOMC) meeting. The policymaker said, “He favors a 25 basis point rate hike at the upcoming meeting and continued policy tightening beyond that.” Talking about the data, US Retail Sales and regional activity numbers were downbeat enough to hint at a “soft landing” of the world’s largest economy, which in turn weighed on the US Dollar and underpinned the Gold price.

China propels XAU/USD

While the US Dollar weakness underpinned the Gold price run-up, upbeat headlines surrounding China, one of the world’s biggest XAU/USD users, also favored the metal buyers. Among the key headlines, chatters suggesting a pick-up in the demand ahead of the week-long Lunar New Year Holidays and the People’s Bank of China’s (PBOC) rejection to alter the current monetary policy strength the risk-on mood, as well as the Gold price.

Risk-on mood favors Gold buyers

Be it the talks surrounding the Federal Reserve’s policy pivot or China reopening, market sentiment remained positive and underpinned the Gold buying in the last few weeks. While portraying the mood, the United States Treasury bond yields dropped to the multi-day low as traders rushed for riskier assets. That said, the benchmark US 10-year Treasury bond yields portrayed a three-week downtrend before bouncing back to 3.48%.

Multiple statistics to entertain XAU/USD traders

Even if the Federal Reserve’s ‘black out’ period and Lunar New Year holidays in China may restrict market moves, the presence of the first readings of January’s Purchasing Managers Indexes for the United States, Europe, the UK and Australia will entertain Gold traders. Additionally important will be the advance forecasts of the US four quarter (Q4) Gross Domestic Product (GDP). It’s worth noting that the market consensus does suggest softer prints for the US and the same could weigh on the US Dollar, while also allowing the Gold buyers to keep the reins.

Also read: Gold Price Weekly Forecast: XAU/USD could extend uptrend to $1,950; US GDP in spotlight

Gold price technical analysis

After consecutive five positive weeks and refreshing multi-day high, the XAU/USD price seesaws inside a three-day-old symmetrical triangle as bulls take a breather while keeping the reins.

That said, above 50 level of the Relative Strength Index (RSI) line, placed at 14, as well as the Moving Average Convergence and Divergence (MACD) indicator’s easing bearish signals keeps the buyers hopeful.

Additionally, the Gold price also defends Thursday’s breakout of a one-week-old descending trend line inside the aforementioned triangle formation, now support around $1,922.

Even if the quote breaks the stated resistance-turned-support line, an upward-sloping support line from January 11 and the 200-Hour Moving Average (HMA), respectively near $1,913 and $1,904, could probe the XAU/USD bulls before the $1,900 key support.

In a case where the Gold price drops below $1,900, the March 2022 low near $1,890 will act as the final defense of buyers.

Alternatively, the aforementioned triangle’s resistance line, close to $1,930 at the latest, restricts the immediate upside of the Gold price.

Following that, a gradual run-up towards March 2022 peak surrounding $1,965 can’t be ruled out.

Overall, the Gold price remains firmer even if the buyers are less active of late.

Gold price: Hourly chart

Trend: Bullish

Reuters reported that the European Central Bank (ECB) is set to raise interest rates by 50 basis points in both February and March and will continue to raise rates in the months after, ECB governing council member Klaas Knot said in an interview with Dutch broadcaster WNL on Sunday.

"Expect us to raise rates by 0.5% in February and March and expect us to not be done by then and that more steps will follow in May and June," Knot said.

EUR/USD update

(Bearish schematic could be playing out)

The Euro is in the barroom brawl, chopping around support and resistance. If the bulls commit, then the 1.0870/90s and potentially the 1.09 psychological level could be attractive to the bears who are in anticipation of a premium for the opening sessions of the week. 

There are red news events scheduled on both the Europen and US calendar so traders might be reluctant to get too heavily positioned leading up to those considering the Federal Reserve meeting at the start of February. 

• AUD/USD has the potential for a move-up in the initial balance for the week. 0.70/20 is eyed as key resistance. 
• The key areas to the downside are 0.6950 and 0.6910 ahead of 0.6870. 

As per last week's end-of-week analysis, AUD/USD Price Analysis: Bulls are trapped, 0.6950 eyed before further downside potential to test below 0.6800, the bulls are testing bearish commitments here at a critical juncture for the week ahead. 

AUD/USD prior analysis

We witnessed a move below the rising channel and there was a price imbalance (PI) on the way to 0.6935 with the 38.2% Fibonacci around 0.6950. It was stated that if the bears committed there at a premium, then there would be prospects of a break below support of 0.6905 to open the price imbalance below and a run to 0.6800 and 0.6750 below there. 

AUD/USD update

As seen, we got the move up and even a break to 0.6970. This is key. 

As seen on the daily chart, the bulls have come up for a move into a critical resistance area. 

Zoomed in...

The bears really need to commit at this juncture and take out the dynamic trendline support or face a protracted bullish move for the opening days of this week. 

AUD/USD H1 chart

There are a number of key areas outlined above on the 1-hour chart.

The price imbalances (PI) are eyed with the potential for a move-up in the initial balance for the week to mitigate the imbalances and to test the peak formation left behind from Wednesday's highs last week.

The key areas to the downside are 0.6950 and 0.6910 ahead of 0.6870. 

Investors are waiting for the first Federal Reserve meeting of the year in early February to see if it raises interest rates by 25 basis points (bps) or 50 bps as it did in December after four straight 75 bps increases. We have entered the Federal Reserve blackout period while the market is eagerly pricing in another step down in its tightening policy.

The sentiment could be boosted at the open this week on the back of the Wall Street journal's weekend article stating that ''Federal Reserve officials are preparing to slow interest-rate increases for the second straight meeting and debate how much higher to raise them after gaining more confidence inflation will ease further this year.''

''They could begin deliberating at the Jan. 31-Feb. 1 gathering how much more softening in labour demand, spending and inflation they would need to see before pausing rate rises this spring.''

''In recent public statements and interviews, Fed officials have said slowing the pace of rate increases to a more traditional quarter percentage point would give them more time to assess the impact of their increases so far as they determine where to stop,'' the article continued. 

US Dollar update

The greenback has been mostly on the defensive as a slew of disinflationary data sent bulls onto the backfoot in recent days. Also, US Treasury yields have been trending lower all month but rose on Thursday and Friday. If this were to continue this week, the greenback could recover into red news on the calendar with US Personal Consumption and Expenditure as well as US Gross Domestic Product on the cards. 

The US Dollar is now at a crossroads, pressured on the front side of the resisting trendline with 101.30 lows in sight as a potential death-line for the week ahead.