During a quiet Asian session on Monday, gold (XAU/USD) picks up bids towards an intraday high as bulls benefit from a weaker US dollar and a firmer mood. Nonetheless, the precious metal GOLD snapped a four-week downtrend while bouncing off a two-year low as greenback bulls took a breather amid mixed data and repeated chatter of a 50 basis point rate hike, backed up by Chinese optimism.

Several Fed policymakers, including Chairman Jerome Powell, refrained from calling for a 75-bps rate hike while defending their previous projections of a half-percentage-point increase in the Fed rate over the next few meetings. The US dollar is being weighed down by mixed US data and cautious market optimism.

Because of China’s status as one of the world’s largest gold consumers, Shanghai’s gradual unlocking and the mainland’s reduction in covid cases as well as virus-related deaths have encouraged gold buyers.

Nonetheless, the US Dollar Index (DXY) posted its biggest weekly loss since January, snapping a six-week uptrend, falling 0.22 percent on a day near 102.80 by press time.

The DXY’s weakness ignores recently firmer US Treasury yields, up to three basis points around 2.81 percent at press time, in order to justify the S&P 500 Futures’ 1.0 percent gain.

Given the risk-on environment and the weakening US dollar, the gold price may broaden its recent recovery moves. However, the latest Federal Open Market Committee (FOMC) Minutes and monthly PMIs will be critical for determining clear directions.

Gold Technical Outlook

A clear upside break of the monthly falling channel, combined with a firmer RSI (14), keeps gold buyers optimistic within a one-week-old rising channel formation. However, the 100-SMA level near $1,852, followed by the upper line of the stated weekly channel near $1,860, limits the short-term XAU/USD upside.

Gold’s corrective moves remain elusive beyond the support line of the aforementioned channel, which was at $1,825 at the time of publication. Gold price continues to fluctuate near 1850 level, remaining stable below it until now, and stochastic continues to provide negative signals on the four hours time frame, waiting to resume the bearish wave with next targets located at 1812.50 followed by 1780.25, noting that breaching 1850.00 will cause the price to begin intraday recovery.

Today’s trading range is expected to be between 1815.00 support and 1855.00 resistance. Good luck!