Gold Trades Bearish Before FOMC- Sideways Range Breakout
Arslan Butt • 1 min read
During the Asian session, the yellow metal GOLD traded slightly bearish to test the low of $1,222.74. Recalling our previous update, gold was trading in a narrow range of $1,224 – $1,236, but it’s been violated over a stronger dollar.
At the moment, it’s hard to confirm whether it’s a breakout or a fakeout as the investors await FOMC Statement and the Fed Fund Rate during the US session. Here’s what to expect…
FOMC Statement & Fed Fund Rate
Today, the movement in gold is highly dependent on the US monetary policy decision. For all the newbies, the central bank’s Federal Open Market Committee (FOMC) is likely to maintain the hawkish tone seen in recent policy statements, while keeping interest rates unchanged this time.
During 2018, we have seen three rate hikes from the FED and it’s because the US economy flourished and inflation began to pick up. The Fed monetary policy outlook still remains hawkish as Fed Chair Jerome Powell signaled further rate hike in December, with two more hikes by mid-2019.
Gold shares a negative correlation with the greenback, which means a surge in dollar causes a plunge in gold and vice versa. For the moment, the dollar is trading with a bullish sentiment and has come out of the $1,224-$1,236 range. On the lower side, the immediate target will be $1,221 and $1,217.
Key Trading Level: 1291.9
GOLD – XAU/USD – Trading Idea
We just shared a forex trading signal to short gold below $1,224 with a stop above $1,227 and a take profit of $1,220.