XAU/USD Current Price: $2,572.12
- The Federal Reserve is about to announce its decision on monetary policy.
- A 25 basis point cut is already priced in, but officials could still surprise the market.
- XAU/USD will likely turn lower in the short term and the Fed will determine the direction.
Gold traded around $2,570 per troy ounce on Wednesday, unchanged on the daily chart, ahead of the Federal Reserve's monetary policy announcement. The U.S. central bank is expected to cut interest rates for the first time in four years after slashing them to near record levels in the wake of the pandemic-hit inflation surge. Policymakers are also considering the impact of financial regulation on economic development, but the market is unlikely to hear from them.
The Fed is also due to release its Summary of Economic Outlook (SEP), which includes updated forecasts for growth, inflation, and unemployment, as well as officials' views on the future direction of monetary policy. The latter could have a big impact on the US dollar, as financial markets are already pricing in a 25 basis points (bps) rate cut ahead of the release.
Generally speaking, the more dovish the event, the more the US Dollar will weaken against its major rivals, while an unexpected hawkish outcome will likely have a bigger impact on the surprise factor and benefit the US Dollar.
XAU/USD Short-Term Technical Outlook
From a technical perspective, the daily chart of XAU/USD shows that risks are tilted to the upside. The pair is hovering around the all-time high of $2,589.50 recorded this week, but all moving averages are heading much lower than the current levels. The nearest is the 20-day simple moving average (SMA), which is offering support at the $2,520 price zone. At the same time, technical indicators are trading well above their mid-lines with uneven and limited directional strength.
However, in the short term, risks are tilted to the downside. The directionless 20 SMA is acting as intraday resistance, preventing any upward movement. The 100 and 200 SMAs have partially lost their upward momentum and are well below current levels. Finally, technical indicators are pointing to a downtrend, with momentum indicators accelerating the decline below the 100 line.
Support Levels: 2,561.65 2,550.00 2,542.40
Resistance Levels: 2,574.80 2,590.00 2,605.00
