The EUR/USD continues to decline amid growing uncertainty over the EU elections and the Fed’s decision

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Gold (XAU/USD) is trading a quarter of a percentage point lower on Tuesday after being rejected by the key support-turned-resistance at $2,315 on Monday night. Expectations of higher interest rates in the U.S. are weighing on the precious metal. Better-than-expected U.S. employment data released on Friday suggested continued inflationary pressures. This, in turn, makes it less likely that the U.S. Federal Reserve (Fed) will cut interest rates in September, and maintaining higher interest rates increases the opportunity cost of holding non-yielding gold, making it less attractive to investors.

That said, the outlook for global interest rates is more moderate, providing a supportive context for gold. The Bank of Canada (BoC) cut its overnight interest rate by 0.25% to 4.75% last week, as did the European Central Bank (ECB). The release of lower inflation data in Switzerland has sparked speculation that the Swiss National Bank (SNB) might also cut interest rates at its June 20 meeting after an initial cut in March. Gold traders will now look for more clues on price direction at the June Federal Reserve meeting, which concludes on Wednesday, as well as the U.S. Consumer Price Index (CPI) data for May to be released the same day.

Technical Analysis: Gold retests resistance and plunges

Gold has retraced to retest the bottom of the range at $2,315, plunged, and started to fall again. Gold is in a short-term downtrend, and given that “the trend is your friend,” it will likely continue lower.

The next bearish target is around $2,285, the 100% extrapolation of the previous bearish move in May “a”. A stronger move down could see Gold find support at $2,279 (late April-early May low).