Spot gold turned lower from its $2,600 record highs following the Fed’s interest rate cut event!
Are we looking at an opportunity to jump in XAU/USD’s long-term uptrend?
Let’s take a closer look at the 4-hour time frame:
Gold (XAU/USD) 4-hour Forex Chart by TradingView
In case you missed it, the Fed had a “Brat summer” moment and surprised some traders with a 50bps interest rate cut on Wednesday. Not only that, but the “Dot plot” projections also pointed to more rate cuts this year and the next.
However, the Fed also raised its medium-term interest rate forecasts, and JPow hinted in his presser that the next rate cut may not be smaller than 50 basis points.
This is likely why the U.S. dollar remained resilient against its counterparts despite the rate cut. XAU/USD, which has been having a good September so far, jumped to a new record high of $2,600 before the bears stepped in.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the U.S. dollar and gold, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Are XAU/USD bulls just taking a breather?
We’re taking a closer look at the $2,550 area that lines up with the Pivot Point ($2,550) line and the 38.2% Fibonacci retracement of gold’s latest upswing.
If the long wicks on the 4-hour chart lead to green candlesticks and consistent trading above $2,550, then XAU/USD could draw in enough buying pressure to retest its $2,600 previous highs.
If you’re anticipating a deeper pullback for gold prices, we can also consider a possible trip to the $2,525 zone near the 100 SMA, S1 ($2,514) Pivot Point, 61.8% Fib retracement, and previous resistance levels.
A retracement to the lower potential support zone would provide a better entry price for those who expect XAU/USD to make new monthly highs in the next few weeks.
Of course, we’re not discounting a bearish turn gaining momentum and leading to a long downswing.
Watch out for more bearish candlesticks and consistent trading below the mid-channel support zone which could lead to a retest of previous lows near $2,500.
Don’t forget to practice proper risk management and stay aware of top-tier market catalysts when trading this one. Good luck!