It’s difficult to imagine what’s going to change the market, and that’s not going to be anytime soon.

• The AUD/USD initially tried to rally during the session on Friday but gave back gains as the market has been turned around.
• The speech at Jackson Hole by Jerome Powell was much more hawkish than people anticipated, so at this point, it looks like the US dollar is being flocked to yet again.
• As I record this, we are breaking back down below the 0.69 level, and therefore it’s possible that we could go much lower.

Breaking down below the recent pullback opens up the possibility of a move down to the 0.68 level, possibly even the 0.67 level. This is a market that has been negative for quite some time, and it is starting to look a lot like the stock markets, so it seems as if we are going to follow stock markets as far as risk appetite is concerned. Rallies at this point still look to be very tentative, and at the first signs of exhaustion, I am more than willing to start shorting.

Downward Pressure Ahead

The 50-Day EMA sits just above and is offering a significant amount of technical resistance, sitting just below the 0.70 level. The 0.70 level is an area that obviously is a large, round, psychologically significant figure, and an area that you will be paying close attention to. The size of the candlestick also tells me that we more likely than not will continue to have downward pressure, so I think it’s essentially a situation where we have already made up our minds as to which direction we are going.

It’s not unless something changes quite drastically with the Federal Reserve that I see this market changing, and it’s hard to imagine that they would immediately after talking about how hawkish they wanted to be. In fact, it’s not even that they were leaving much doubt, it’s just that traders for whatever reason chose not to pay attention to the Federal Reserve. I think they finally got the picture during the Friday session, so we should resume US dollar strength going forward. With the type of move that we have seen, do not be surprised to see a little bit of a short-term relief rally, followed by another hard pounding to the downside. It’s difficult to imagine what’s going to change the market, and that’s not going to be anytime soon.

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The pair will likely have a bearish breakout as sellers target the first support of the pivot point at 1.1700.

Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.1700.
• Add a stop-loss at 1.1850.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.1840 and a take-profit at 1.1900.
• Add a stop-loss at 1.1750.

The GBP/USD currency pair was in a tight range on Thursday morning as market participants waited for commentaries by Jerome Powell and Andrew Bailey at the Jackson Hole Symposium. It was trading at 1.1795, which was slightly above this week’s low of 1.1720.

Jackson Hole Symposium

The Federal Reserve and the Bank of England have embraced a more hawkish tone this year as they fought the soaring inflation. The BoE has hiked interest rates in all its meetings since December while the Fed has increased rates by 225 basis points. In their most recent meetings, the two hiked by 50 and 75 basis points, respectively.

There are signs that these rate hikes are having a negative impact on the respective economies. Data published by S&P Global on Tuesday showed that the manufacturing and services PMIs declined sharply in July.

Therefore, the GBP/USD price will likely show some volatility during this week’s Jackson Hole Symposium. The two central bank governors will provide more details about the status of rate hikes and whether they will continue hiking.

Analysts expect that the Fed will hike rates by 0.50% and then shift to smaller increases afterward. On the other hand, the BoE will find it difficult to hike rates as the economy goes through substantial challenges. The BoE expects that inflation will rise to 13% this year. In a report this week, analysts at Citigroup predicted that inflation will rise to 18.3%.

The BoE responds to high inflation by hiking interest rates. However, it is unclear whether interest rates will lower this inflation since it will be caused by rising wholesale gas prices.

The GBP/USD pair will react mildly to US economic data that will come out on Thursday. Economists expect the data to show that the country’s economy contracted in Q2.

GBP/USD forecast

The four-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. It managed to move briefly below the important support level at 1.1760, which was the lowest level in July this year. At the same time, the pair moved below the standard pivot point, the 25-day exponential moving average, and the Ichimoku Cloud.

Therefore, the pair will likely have a bearish breakout as sellers target the first support of the pivot point at 1.1700.

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• The AUD/USD has fallen a bit during the trading session on Wednesday as the market continues to drift around the 0.69 level.
• The Aussie dollar is acting much like the other currencies around the world, as we are waiting to see what the Jackson Hole Symposium is going to bring.
• The candlestick for the day is a bit lackluster, and therefore it’s likely that we will continue to see this market hang about until we get the speech from Jerome Powell at 10 AM Eastern Standard Time on Friday.

Looking at this market, you can see that we have been somewhat sideways for a couple of days, and therefore the market will more likely than not continue to see a lot of choppy short-term behavior. Between now and that announcement/speech, I think what we’ve got going on is a lot of Brownian motion, which is essentially going nowhere.

Noise Ahead

The Australian dollar is highly levered to the commodity markets, so you do need to be cautious going forward, as central banks are more likely than not going to continue to tighten monetary policy, which should drive down demand for commodities, lease in the short term as it will lead people to believe that economies around the world are going to slow down. The market will more likely than not continue to see a lot of nonsense over the next couple of days, so I would not necessarily put a lot of money into it. However, by the time we get to the weekend, we may have a little bit more in the way of clarity as to how the market reads Jerome Powell.

If we break down below the lows of the last couple of days, it’s likely that the Australian dollar will go down to the 0.67 level. On the other hand, if we turn around a break above the 0.70 level, it’s likely that the market will probably go looking into the 0.71 level. Breaking above the 0.71 level could open up the possibility of a bigger move, and therefore it’s likely that we would see the overall trend change. I don’t think that’s going to happen, but it’s likely that we will continue to see a lot of uncertainty, which should lead more of a charge towards the US dollar overall.

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Gold futures ended the last trading week flat below the $1800 level, as the yellow metal recorded a weekly loss. After it crossed the $1800 resistance earlier this month, XAU/USD gold prices struggled to maintain the momentum created by the dollar’s rally and the US central bank’s monetary tightening path. Gold’s losses last week brought it to the level of 1745 countries for an ounce, the lowest in three weeks. The XAU/USD gold market suffered a weekly decline of 3.2%, adding to its year-to-date 2022 loss of around 4%. In the same way, the price of silver, the sister commodity to gold, fell to less than $ 19 an ounce, so the white metal recorded a weekly loss of about 9%, bringing silver closer to a bear market.

The precious metals market was affected by the strong dollar and the rise in Treasury yields.

The US Dollar Index (DXY), which measures the performance of the US currency against a basket of major currencies, rose to 108.09, from an opening at 107.48. The index enjoyed a weekly rise of 2.32%, adding to its rise in 2022 by 12.63%. A strong US currency gain is bad for dollar-priced commodities because it makes them more expensive to buy for foreign investors. Commenting on the performance. “The rise of the US currency has taken a heavy toll on the yellow metal, which was already seeing profit-taking after hitting $1,800,” said Craig Erlam, chief market analyst at OANDA, in a note.

Additional Factors Affecting Gold

US Treasury yields rose overall, with the benchmark 10-year bond yield rising 9.4 basis points to 2.974%. One-year yields rose 2.8 basis points to 3.256%, while 30-year yields jumped 7.2 basis points to 3.21%. The spread between the two-year and 10-year returns narrowed to about -30 basis points. The spread widened to as much as -45 basis points this week.

The gold market in general is sensitive to the high interest rate environment as it raises the opportunity cost of holding non-yielding bullion.

In other metals markets, copper futures rose to $3.6675 a pound. Platinum futures fell to $889.00 an ounce. Palladium futures fell to $2,127.50 an ounce.

Gold is headed for its first weekly drop in five as investors weigh mixed signals from Fed officials on the scale of the next rate hike and the dollar’s strengthening. The price of bullion fell to a three-week low amid an ongoing debate over whether the Federal Reserve will switch to smaller rate hikes. Policy makers offered differing views, with James Bullard of St. Louis urging a move by another 75 basis points while Esther George of Kansas City took a more cautious tone, saying that the case for higher US interest rates remains strong but the pace is up for debate.

• Higher interest rates usually dampen interest-free gold’s allure, though bullion recovered from a nearly 16-month low in July on bets that the Fed will be less aggressive with increases as the US economy faces headwinds.
• The minutes of the central bank’s July meeting, which were released last Wednesday, showed that officials agreed on the need to reduce the pace of interest rate increases at some point.

Economic Data

The latest data indicated that the US labor market remains healthy, with unemployment claims falling for the first time in three weeks. This will likely leave the door open for the Fed to continue walking aggressively, although new monthly readings on inflation and employment ahead of the September meeting may influence the decision. Commenting on this, Commerzbank AG analysts said in a note: “The prospect of further monetary tightening and a firmer US dollar through at least the end of the year continues to weigh on the direction of gold prices.” This week could send new signals in this regard.”

Today’s XAU/USD Gold Price Forecast:

On the daily chart below, the price of XAU/USD gold is still in a bearish correction range. It is breaking the support level of $1,740 an ounce and will push the technical indicators towards oversold levels and enable it and from below to think about buying gold. Despite the tendency of global central banks to further tighten monetary policy, led by the US, the gold market is receiving impetus from increasing global geopolitical tensions. I still prefer buying gold from every bearish level. On the other hand, the bulls will not regain control of the trend without moving the gold price towards the psychological resistance level of 1800 dollars an ounce again.

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