USD Gears Up for the Upcoming FOMC; Investors Eyeball Gold

The theme for the week was risk-on trading which helped push the AUD and the NZD upward. As these are risk-on currencies, their strength meant that the USD, being a risk-off currency, fell flat. Even if the US data was shown to be rather favorable after the NFP, the US still predominantly. fell.

US Entering a Recession

One of the biggest reasons for the drop of the USD value was the fact that the US has formally entered into a recession, according to the National Bureau of Economic Research. This was due to the sharp decline in employment as well as production. Even if the employment data slowly climbed up in the NFP, that wasn’t enough to get them out of the rut.

The Upcoming FOMC Statement

The FOMC will determine what Jerome Powell plans to do in order to push the economy of the US. If ever Powell’s statement is not very favorable for the US, we can expect the USD to plunge lower, which may be a good sign for Gold.

Technical Outlook of XAUUSD

As gold and the USD has always had this inverse relationship, investors always look to the precious metal whenever the greenback is in trouble.

After gold’s strong bout during the NFP, price eventually hit the 1672 level and bounced back in favor of gold. In the last two days, gold climbed from 1682 to up to 1719. Now, it is trading above the 1719 level.

However, there is another major level that investors are eyeballing right now– the 1749 level. As this is a major resistance level, price could possibly get stopped here should the FOMC statement push gold higher. But if the FOMC statement is favorable to the USD, we can probably expect a push lower to another major support level.

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