USD Sell-Off Leaves Gold Room to Rally

USD Under PressureGold prices are rallying on Tuesday as the USD sell off deepens. The greenback came under pressure late last week as the latest round of US labour market readings failed to deliver and bullish encouragement. With the headline NFP coming in below expectations, marking a sharp drop on the prior month, there was little to suggest that the Fed would take a more hawkish stance at the upcoming FOMC meeting. While a further rate hike is still the expected outcome, traders are now anticipating that the Fed might be less hawkish in its outlook.US CPI On WatchThe deciding factor will be tomorrow’s US inflation data. If this see confirming a further drop in inflation, USD looks likely to continue to fall lower near-term, allowing gold room to rally. Yesterday we heard from several Fed members sharing the view that the bank was close to the end of its tightening cycle, adding to bearish sentiment for the Dollar. Additionally, the latest US consumer inflation expectations data was seen falling to its lowest level in around two-years.Provided a further fall is confirmed in tomorrow’s US CPI numbers, gold prices look poised to gain further over the week as the Dollar continues lower. Only a surprise upside reading will negate the bullish outlook for gold.Technical ViewsGoldGold prices are trading up to their highest levels in a fortnight currently as the recovery off the June lows continues. 1973.51 remains the key level to monitor. Bulls will need to see a break of this level to alleviate medium-term bearishness. To the downside, 1871.04 remains the key support level to monitor.