XAU/USD under light pressure near $2,560

XAU/USD Current Price: $2,562.90

• Better-than-expected US data kept investors cautiously optimistic.
• The Federal Reserve will announce its monetary policy decision on Wednesday.
• XAU/USD is poised to extend its short-term decline, bulls could rally on the downside.

The price of gold is marginally lower on Tuesday, with XAU/USD trading in the region of $2,560 in the US session. The US dollar rallied modestly ahead of the Wall Street open on better-than-expected data from the United States (US). Local indexes hold on to modest gains, reflecting the bullish mood undermining demand for the haven metal.

However, the activity of financial boards is limited before important announcements by central banks. The Federal Reserve (Fed) will start the wave of announcements on Wednesday, followed by the Bank of England (BoE) on Thursday and the Bank of Japan (BoJ) on Friday. The Fed is expected to cut interest rates for the first time in years, a move that was long overdue. On the other hand, the BoE will likely remain on hold, while speculative interest will push BoJ rates higher.

In anticipation of the Fed, speculative interest has fallen to a 25 basis point (bps) rate cut, although there is some hope that the central bank will opt for a wider cut of 50 basis points. The level of aggressiveness from US officials will determine what happens to the greenback on Wednesday. The more convenient the decision, i.e. a 50 bps cut and the anticipation of more cuts, the more the USD will suffer. The US dollar, on the other hand, may recover sharply if the central bank adopts a more accommodative stance.

XAU/USD Short Term Technical Outlook

The daily chart for the XAU/USD pair shows that the slide looks corrective. The pair continues to develop above all of its moving averages, with the 20 Simple Moving Average (SMA) losing some of its bullish power, but well above the longer ones at around $2,520. Technical indicators, meanwhile, remain well above median lines, although they lack clear directional strength. The Relative Strength Index (RSI) indicator is falling from near overbought levels, but not enough to anticipate a steeper decline.

In the short term, however, the risk is tilted to the downside. On the 4-hour chart, XAU/USD has broken below the 20 SMA level, while the 100 and 200 SMAs are aiming marginally higher, well below the current level. Finally, technical indicators are aiming south almost vertically, currently challenging their midlines and suggesting another leg to the south, especially if Gold breaks the intraday low at $2,561.65.

Support levels: 2,561.65 2,550.00 2,542.40

Resistance levels: 2,574.80 2,590.00 2,605.00