The #GOLD price is consolidating ahead of the #FOMC rate statement this evening. The price looks to be bearish currently but will that change by this evening?
We’re going to take a look at Gold (XAU) ahead of the FOMC rate statement this evening.
The Federal Reserve is set to announce the latest rates, and it’s likely that they’re going to leave things unchanged. However, we don’t know what their plan is moving forward. There has been talk about potential rate hikes if inflation remains above 2% for a sustained period of time.
The Fed could be hawkish in their tone. However, we know how these things go: one comment can change the whole outlook for the market. So, I wanted to look at XAU and show two situations that could happen.
In the four-hour timeframe, the price already broke through last week’s low. It took out the 1869.76 level, went up, retested, rejected, and then moved down.
Now, we are consolidating within the triangle or the squeeze pattern after seeing an extended impulse to the downside. If we were looking at it from a technical point of view, it would definitely seem like the XAU is bearish. The reason is because of the impulse leg lower, the break below last week’s low, and the consolidation. We could assume that the price would break to the downside again.
The XAU price is currently consolidating below last week’s low ahead of the FOMC meeting. The Fed will likely hold rates and remain neutral on the economic outlook as the data has been mixed recently. If they remain neutral, we will likely see the trend continue and break out lower.
This is what could happen if the Fed comes out hawkish. If they say that they’re on the right track and see the rates increase in 2023, then we could see the price break to the downside. There is a high volume area at around 1780 or 1800 which would be ideal for the price to go to eventually for extended long opportunities.
If the price breaks down, we want to see the break of the trendline. If the price closes or breaks the weekly low, then the price could continue to trade lower and in line with some bullishness of the USD.
However, there are two sides to a coin. If the Fed starts to act dovish, I’d expect the price to trade within last week’s price action. I’d also expect to see a break and retest of the previous week and the current week’s high at 1869.76.
Alternatively, if the Fed holds a dovish tone with talks of more bond tapering, we could see a reversal and the USD could also weaken. This will lead the price to break higher and trade within last week’s range.
That’s what I’m going to be looking out for on XAU. We’ll see how this market performs after the FOMC. Either way, there could be a decent trade opportunity on XAU.
If you’re looking to short, wait for the break of the trendline. If the Fed is divided, we could see the price trade within last week’s price action.
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