The price of gold, represented by XAU/USD, struggles above 2000 dollars. Despite recovering from a four-day low of $1,992.50, the precious metal's upward movement remains fragile due to bullish bets on the US Dollar Index (DXY).
The US Dollar Index is likely to continue its recovery and break the immediate resistance of 101.75 as the chances of consecutive rate hikes from the Federal Reserve (Fed) are high. According to the CME Fedwatch tool, the probability of a rate hike is almost 80%.
US equities are expected to be stock-specific during the quarterly results season. Manufacturing and oil-dependent companies may recover as gasoline prices were significantly lower in March. S&P500 futures have also gained significantly on early Monday following a mild sell-off on Friday.
The demand for US government bonds has significantly dropped due to rising bets on further policy restrictions by the Fed. Atlanta Fed President Raphael Bostic suggested that a quarter-percentage-point interest rate hike can help the Fed end its tightening cycle with confidence that inflation will return to its 2% target.
Gold's technical analysis shows a bearish trend as it failed to test the critical resistance of $2,050.00 and corrected sharply. The precious metal has dropped below the 50-period Exponential Moving Average (EMA) and the upward-sloping trendline plotted from April 03 low. The Gold price is expected to decline further towards the advancing trendline placed from March 22 low.
The news of the likelihood of consecutive rate hikes from the Fed and the drop in demand for US government bonds can have a significant impact on forex markets. The expected rise in interest rates can strengthen the US dollar, which may cause a decline in the price of gold, as seen in the technical analysis. Forex traders can take advantage of this news by analyzing the impact on different currency pairs and adjusting their trading strategies accordingly. It is essential to keep track of news related to the Fed's policies and other economic indicators to make informed forex trading decisions.