Gold Soars as US Fed Powell Indicates Willingness to Cut Rates

Summary:
• US Dollar down and the gold price is up as US Fed Chairman, Jerome Powell, indicates that a series of rate cuts may be underway.

The US Dollar is down on the initial statements by US Fed Reserve Chairman Powell. The markets have been expecting Powell to announce intentions of the Federal Reserve to perform a 25bp “insurance rate cut” on July 31^st when the FOMC meets to decide monetary policy, and this was confirmed today.

The Fed Chief has indicated his organization’s willingness to cut rates, as global economic forecasts dim outlook for the US economy. He has also reiterated the independence of the Federal Reserve, and maintained that the bank has the statutory powers to cut rates if and when it decides to do so.

Speech Highlights

• “It appears trade uncertainties and concerns about global economy continue to weigh on US Economic outlook -prepared testimony.”
• “Baseline outlook is for U.S. economic growth to remain solid, labor markets to stay strong and inflation to move back up to central bank’s 2% target.”
• “There is a risk weak inflation will be even more persistent than Fed currently anticipates.”
• “U.S. economic growth appears to have moderated in Q2; economic momentum appears to have slowed in some major foreign economies in recent months.”
• “Consumer spending growth was weak in first quarter but data show it has bounced back and is running at a solid pace.”

I expect to see safe haven gold demand as the risk-off sentiment kicks in. I would wait for the hourly candle on the gold chart to close at 1pm UTC.

• If it closes above the R2 pivot, I would buy at the pivot price of 1408.56, targeting the R3 pivot at 1417.20 for a quick intraday trade, with stop loss at 1406. This setup carries higher risk.
• If the candle does not break the daily R2 pivot to the upside, I would allow a pullback to the R1 pivot at 1403.04, targeting the R2 pivot at 1408.56, and possible the R3 pivot at 1417.20. Stop loss would be set at 1399.50.

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XAUUSD: One hour chart