GemForex - Powell's policy guidance holds the key

Will Powell's pledge to fight inflation revive the dollar uptrend？

Fed remains committed to tame inflation despite recession risks estimated at 40% chance – Reuters poll

The US Federal Reserve (Fed) will opt for another 75-basis point rate hike rather than a larger move at its meeting next week to quell stubbornly high inflation as the likelihood of a recession over the next year rises to 40%, as per the latest Reuters poll of economists.

Despite an imminent technical recession in the US, the Federal Reserve (Fed) is determined to deliver another super-sized rate hike when it concludes its two-day policy meeting on July 27. Fed Chair Jerome Powells response to fighting inflation will be closely examined alongside the policy guidance for the September meeting.

Trading the US dollar and GOLD with the Fed announcement

The US dollar index is trying to find a base just above the 106.00 level after the recent correction from a two-decade top of 109.29. Hawkish policy guidance from Powell will revive the bullish interest in the dollar, breaking the index from its previous weeks range to recapture the 107.50 barriers.

The above should provide traders with some forward guidance in trading the USD Dollar against other major currencies in the world, such as the EUR, JPY, GBP, and AUD.

For the precious yellow metal, we can see that although 50-SMA restricts the immediate downside of the gold price to around $1,713, bearish MACD signals and the 100-SMA challenge the XAU/USD buyers unless crossing the $1,727 hurdle.

A clear downside of the 50-SMA support near $1,713 is an open invitation to the gold sellers as a two-week-old horizontal support zone around $1,697-98 probes the metals additional south-run before directing the bears to the yearly low of $1,680.