Gold, Silver, and EUR/USD Technical Analysis Ahead of Fed Decision

The Federal Reserve will announce its final rate decision for 2024 on Wednesday, setting the tone for the US dollar and major forex pairs. The US dollar holds firm ahead of this decision. A strong retail sales report for November has heightened speculation that the Fed may not need to pursue aggressive rate cuts despite recent inflation upticks. According to the FedWatch Tool, there is a 97% probability of a 25-basis-point rate cut on Wednesday. Investors remain focused on the Summary of Economic Projections (SEP) and the Dot Plot, which will outline the Fed’s plans for 2025.

As traders eye the Fed’s decision, the EUR/USD pair remains in consolidation below the 1.0600 handle. European December PMI figures slightly exceeded expectations, and services PMI remains in contraction, underscoring concerns over a deepening economic slowdown in the region. This is supported by the muted market reactions to European Central Bank (ECB) officials’ remarks, which have pressured the Euro. Traders now await clear directional cues from the Fed’s policy announcement.

On the other hand, gold (XAU) prices remain in consolidation ahead of the Fed’s decision. The expectation of a Fed rate cut supports gold, as lower interest rates reduce the opportunity cost of holding the non-yielding metal. However, current market conditions, including strong US economic data and inflation concerns, have limited gold’s upside. Investors closely monitor the Fed’s policy outlook and the core Personal Consumption Expenditures (PCE) Price Index data for further guidance.

Gold (XAU) Technical Analysis

Gold Daily Chart – Consolidation at Resistance

The daily chart for gold shows that the price fluctuates around the 50-day SMA and remains above the 100- and 200-day SMAs. The consolidation within tight ranges in December is likely due to thin liquidity. Despite these fluctuations, the overall trend remains upward. The immediate resistance is at $2,720, while $2,790 is the barrier for further upside in the gold market. Today’s Federal Reserve meeting may inject strong volatility. However, a break above $2,720 is required for further gains.

Gold 4-Hour Chart – Consolidation

These price consolidations are also evident in the 4-hour chart for gold. The consolidation boundaries remain between $2,615 and $2,720; a break of either level will provide further direction. The movement of the RSI also reflects the consolidation in the gold market. A break above $2,720 could initiate a move toward the $2,790 zone.

Silver (XAG) Technical Analysis

Silver Daily Chart – Ascending Channel

The daily chart for silver (XAG) shows that the price is trading within an ascending channel. The price is approaching the support zone within this channel, around $29, and a break below this level could trigger a strong decline. Tuesday’s daily candle was a reversal, but the daily close remains below $30.70, keeping the short-term trend neutral. The price currently trades between the 50-day and 200-day SMAs, indicating a lack of clear direction.

Silver 4-hour Chart – Descending Broadening Wedge

The 4-hour chart for silver shows that the price failed to break the $32.50 resistance and dropped lower. The price action indicates a neutral direction within the $29.60 to $32.50 zone. The rebound in the RSI at lower levels suggests that silver may find support around the $29.60 zone. The price is likely to remain neutral in December due to thin liquidity. The Fed’s decision may induce some silver movement, but a break above $32.50 is required to move in a further direction.

EUR/USD Technical Analysis

EUR/USD Daily Chart – Range Bound In December

The daily chart for EUR/USD shows that the price has been consolidating around the long-term support at $1.047. The recent consolidation range remains between $1.047 and $1.06, as the US Dollar Index fluctuates between 107 and 105.60. A break below $1.04 may trigger a long-term downtrend in EUR/USD, while a break above $1.06 could signal a bottom and the continuation of upward momentum. In today’s monetary policy decision, the Fed’s statements will impact the US dollar and the EUR/USD pair. A break of these levels are required to define the next direction for EUR/USD.

EUR/USD 4-Hour Chart – Descending Channel

The 4-hour chart for EUR/USD shows that the pair remains within a descending channel and has failed to break above $1.06. The consolidation between $1.047 and $1.06 is forming a bearish outlook. To alleviate the bearish pressure, the pair must break above $1.06. A break above this level would also breach the descending channel, potentially leading to positive momentum.