Daily Analysis XAUUSD - 19 June 2023

Last week, the Federal Reserve (Fed) indicated that there may be a need for borrowing costs to increase by up to 50 basis points (bps) by the end of this year. This led to the US Dollar (USD) gaining positive momentum for the second consecutive day. The USD Index (DXY), which measures the USD against a basket of currencies, is set to continue building on Friday's modest recovery from a one-month low. However, this acts as a hindrance to the USD-denominated gold price.

Furthermore, a more hawkish stance adopted by major central banks has also contributed to limiting the upside potential for gold, which does not yield interest. Notably, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) surprised the markets with a 25 bps rate hike earlier this month. Additionally, the European Central Bank (ECB) increased rates by 25 bps last week, reaching the highest level in 22 years. The ECB also signaled further tightening measures to combat inflation.

Investors may prefer to remain cautious and observe from the sidelines in anticipation of Federal Reserve Chair Jerome Powell's two-day congressional testimony on Wednesday and Thursday. During this event, market participants will seek fresh insights into the future trajectory of rate hikes.

The upward movement in gold encountered strong resistance from a bearish descending triangle pattern, causing the price to decline. This correction was triggered by the strengthening Dollar, which has been showing signs of upward momentum since Friday and is expected to continue. In terms of support levels, the first one to watch is at 1945, followed by a significant support level at 1933. If the price breaks below this level, it could indicate a substantial sell-off in gold.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
2000	1980	1960	1933	1870	1800