Having bottomed at 1,850, Gold (XAU/USD) is now consolidating above this level and below the 21 SMA. It is trading inside the downtrend channel that was formed on April 14. So, the metal is under bearish pressure.
In the hours before the most anticipated event of the week, gold is consolidating around 1,867. It is likely to remain oscillating at this level until the US Fed unveils its verdict. A pullback towards the 21 SMA located at 1,877 could be a signal to sell with targets at 1,850.
In the event of a pullback to the top of the downward channel around 1,890 or if it fails to break and falls below this level, we will have a signal to sell with targets at 1,875, 1,850 and 1,822.
The markets seem convinced that the Fed would adopt a more aggressive response to soaring inflation.
This can be seen through rising yields of US Treasury bonds. This is a factor that keeps gold under selling pressure.
Therefore, the focus remains on the outcome of the FOMC monetary policy meeting to be announced today in the American session at 2:00 PM.
The Fed is expected to raise benchmark interest rates by 0.50%. Besides, the central bank could signal cutting its balance sheet worth nearly $9 trillion.
The market seems to have already priced in the rise in interest rates. Strong volatility could be triggered by the comments of Fed Chairman Jerome Powell, which will be closely examined to see if the US central bank is ready to raise rates in the next meetings to curb inflation.
Our trading plan is to sell gold below 1,877 (21 SMA) or in the event of a pullback to 1890, sell with targets at 1,850 and 1,822. If the bearish force prevails, the price could hit 5/8 Murray at 1,812 as our ultimate target. The eagle indicator is giving a negative signal and is likely to continue under downward pressure in the next few days.
