Gold rebounds to fresh daily highs above $1310 as USD sell-off picks up steam

• US Dollar Index returns to 97 area.
• J.P. Morgan cuts its forecasts for 2019 and 2020 federal funds rate.
• Wall Street pares early gains on hopes of dovish Fed.

The XAU/USD pair continues to move up and down near the $1310 and struggles to make a decisive  move in either direction. After slumping toward $1302 earlier in the day, the pair took advantage of the selling pressure surrounding the greenback in the early NA session and rose above $1310 before losing its traction and edging down to $1307 area. With the buck meeting a renewed bearish pressure in the last hour, the pair, once again, turned north and reached a fresh daily high of $1314.40. As of writing, the pair was trading at $1311, adding 0.35% on a daily basis.  

The U.S. Census Bureau today reported that retail sales declined by 1.2% on a monthly basis in December to trigger the initial USD selling wave. Although the US Dollar Index was able to shale off the bears after finding support near the 97 area, it failed to hold in the positive territory after J.P. Morgan announced that it slashed its year-end federal funds rate expectation to 2.75% from 3% for 2019 and to 3% from 3.5% for 2020. At the moment, the DXY is down 0.2% on the day at 97.01.

However, dovish Fed expectations also boosted the market sentiment and allowed major equity indexes in the U.S. to erase their early losses, which makes it difficult for the precious metal to continue to gather strength and cap’s the pair’s upside for the time being.

Technical outlook

Despite today’s rebound, the CCI indicator on the daily chart continues to move south toward the -100 mark, suggesting that sellers are retaining control of the pair’s price action. On the downside, the pair could face the first support at $1308 (20-DMA) ahead of $1300 (psychological level) and $1292 (50-DMA). Resistances, on the other hand, could be seen at $1314 (daily high), $1318 (Feb. 13 high) and $1326 (Jan. 31 high).