FX168 Financial News (Hong Kong) News Thursday (June 22) in the early Asian market, the U.S. dollar index continued to be under pressure, and is currently close to the 102.00 mark; spot gold maintained a rebound trend, and the price of gold is currently around $1935 per ounce. Federal Reserve Chairman Jerome Powell’s congressional testimony on Wednesday fell short of more hawkish market expectations, saying the pace of rate hikes was no longer “very important” in favor of a more dovish pace of rate hikes. Affected by this, the U.S. dollar index “dived from a high platform” on Wednesday, while gold prices rebounded sharply from their lows.
Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee on Wednesday that policymakers expect further rate hikes will be needed to contain price pressures.
Last week, the Federal Reserve announced that it would keep the target range of the federal funds rate unchanged between 5% and 5.25%. But the interest rate dot plot hinted that the Fed could raise interest rates by 50 basis points before the end of the year.
It is worth noting that Powell testified on Wednesday that the speed of monetary policy tightening was very important early in the tightening cycle in the past year, but it is not very important now.
Responding to questions from lawmakers about the Fed’s plans, Powell said it might make sense to continue raising rates in the coming months, but at a more dovish pace.As for when to raise interest rates further, Powell said it depends on the upcoming economic data.
Affected by these remarks, the U.S. dollar index fell sharply from an intraday high of 102.72 to as low as 102.02, the lowest since May 12.
Spot gold rebounded sharply from US$1919.54 per ounce and closed at US$1932.08 per ounce that day. In early Asian trading on Thursday, gold prices rebounded further to around $1,935 an ounce.
(Source of spot gold 30-minute chart: FX168)
It was Powell’s first public answer to congressional questions since early March, and he will also testify before the Senate Banking Committee on Thursday.
Powell said in a prepared speech that Fed officials understand the difficulties that high inflation poses for all parties, so “we remain firmly committed to bringing inflation back down to our 2% goal.” Powell’s prepared speech roughly The comments echoed comments he made last week at a news conference following the interest rate policy meeting.
Powell said that almost all members of the Federal Open Market Committee (FOMC) projected that further rate hikes would be appropriate by the end of the year. Bringing inflation down will likely require a period of below-trend growth and some softening of labor market conditions.
As for the pace of rate hikes, Powell told lawmakers: “We’re slowing that down, like you’re going 75 mph on the freeway and then 50 mph on the local highway. Same. And then as you get closer and closer to your destination, you slow down even further as you try to find that destination.”
“Powell maintained the ‘balanced, data-reliant’ language used in last week’s press conference, turning investors into bets that rate hikes will come before year-end as the economy and inflation continue to slow,” said Karl Schamotta, chief market strategist at Corpay. 25 basis points instead of 50 basis points as originally expected.”
Investors widely expect the Fed to resume raising interest rates at its July meeting, but financial market indicators reflect doubts about whether the central bank will raise interest rates further after that.
FXStreet analyst Anil Panchal said that on Thursday, Federal Reserve Chairman Powell will give a second round of congressional testimony, this time in the Senate Banking Committee, which is also very important for observing the direction of gold.
Gold bulls aim to break $1,965 resistance
Judging from the 4-hour chart of gold, the price of gold hit a three-week-long falling support line (around $1,920 per ounce) during intraday trading on Wednesday.
Panchal said that the relative strength index (RSI) is close to oversold conditions, indicating that gold prices will bottom out, which points to a corrective rally towards around $1,950 an ounce.The confluence of the 200-period exponential moving average (EMA) and the downsloping trendline from June 2, currently near $1,965 an ounce, appears to be the key short-term hurdle for gold bulls to cross.
After that, a month-long horizontal resistance area around $1,985/oz will come into focus.
(Source of spot gold 4-hour chart: FXStreet)
On the other hand, Panchal pointed out that if the price of gold falls significantly below $1,920 an ounce, it may quickly pull the price of gold down to $1,900 an ounce. And if gold prices weaken further, it will make it easy for gold to test the early March highs (around $1,858 an ounce).
In terms of short-term trends, Panchal expects a corrective rebound in gold prices.
Bears take control of the situation, and the dollar may face more corrections
On Wednesday, the dollar index fell to 102.02 from 102.70, close to a five-week low hit last week, FXStreet analyst Ross J Burland said. Dollar bears are in control, aiming for a continuation to the downside.
Burland said that from the weekly chart of the U.S. dollar index, the U.S. dollar is bearish. Bears need to break below the 78.6% Fibonacci retracement level when the US dollar index moves to the W-shaped neckline.
(Source of US dollar index weekly chart: FXStreet)
Burland added that the daily chart shows that the dollar index is on the verge of a downside correction after encountering resistance at a Fibonacci level.
(Source of daily chart of US dollar index: FXStreet)
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