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Talking Points:

- Gold Prices Initiate Bullish Series Following Failed Test of October-Lows.

- USD/JPY Risks Further Losses as Price & RSI Snap Bullish Formations.

DailyFX TableXAU/USD

Gold prices appear to be breaking out of a near-term range, with the precious metal at risk of exhibiting a more bullish behavior as it starts to carve a series of higher highs & lows.

Bullion may stay bid ahead of the Federal Open Market Committee’s (FOMC) last 2017-meeting on December 13 as the precious metal clears the monthly opening range following the failed attempts to test the October-low ($1261).

Fed Fund Futures

Even though Chair Janet Yellen and Co. are widely anticipated to deliver a 25bp rate-hike ahead of 2018, the recent advance in the U.S. dollar appears to be losing momentum as the upcoming rotation within the FOMC dampens bets for higher borrowing costs. As a result, market participants may pay increased attention to the fresh forecasts coming out of the central bank as the Fed appears to be on course to implement three rate-hikes per year.

Gold Prices Clear Monthly Opening Range & Initiate Bullish Series

Keep in mind, the FOMC is already expected to keep the interest rate on hold in March 2018 as Chair Yellen’s tenure expires in February, and the broader shift in market behavior may continue to take shape over the coming months as the Fed runs the risk of reaching the end of its hiking-cycle ahead of schedule.

XAU/USD Daily Chart

XAU/USD Daily Chart
  • With gold prices still holding above the $1260 (23.6% expansion) region, near-term outlook for XAU/USD is becoming increasingly constructive especially as the precious metal initiate a bullish sequence; keeping a close eye on the the Relative Strength Index (RSI) as it breaks out of the bearish formation carried over from September.
  • The turn ahead of trendline support raises the risk for a break/close above the near-term hurdle around $1289 (23.6% expansion) to $1291 (50% expansion), with the next topside region of interest coming in around $1297 (23.6% retracement) to $1302 (50% retracement).
  • Need a break of the October-high ($1306) to open up the next hurdle around $1312 (61.8% expansion) to $1315 (23.6% retracement).

USD/JPY fails to preserve the narrow range carried over from the previous week, and the pair faces a growing risk of giving back the advance from the 2017-low (107.32) as both price and the Relative Strength Index (RSI) snap the bullish formations from September.

Mixed data prints coming out of the U.S. economy may continue to rattle the near-term advance in the USD/JPY as it dampens the Fed’s scope to implement higher borrowing-costs, and the U. of Michigan Confidence survey may do little to alter the monetary policy outlook as the gauge for household sentiment is expected to show a marginal increase to 100.9 from 100.7 in October.

In turn, the dollar-yen exchange rate may face a more bearish fate over the remainder of the year as U.S. Treasury yields highlight a similar dynamic and pull back from recent highs, and the

USD/JPY Daily Chart

USD/JPY Daily Chart
  • Downside targets are coming back on the radar for USD/JPY amid the string of failed attempts to close above the Fibonacci overlap around 113.80 (23.6% expansion) to 114.30 (23.6% retracement), with both price and the Relative Strength Index (RSI) threatening the upward trends carried over from September.
  • First downside region of interest comes in around 112.30 (61.8% retracement) to 112.80 (38.2% expansion) followed by 111.10 (61.8% expansion) to 111.30 (50% retracement), which sits just below the 200-Day SMA (111.74).

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--- Written by David Song, Currency Analyst

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