General analysis XAUUSD for 04.05.2022

Current dynamics

The XAU/USD is trading in a limited price range at the beginning of the current week ahead of the Fed meeting. The slight recovery of the trading instrument on Monday is due to falling treasury bond yields. However, it should be taken into account that the US regulator has long prepared the markets for an aggressive monetary policy. The key rate is expected to rise by 50 basis points. In addition, it is likely that the central bank will announce a balance sheet reduction. The Federal Reserve's balance sheet is nearly $9 trillion, with the amount of cuts officials say will amount to $95 billion a month.
Despite unprecedented measures to combat rising price pressures, gold is holding above the 1850.00 level. The FOMC press conference, which starts at 20:30 (GMT+2), plays a key role in this regard. Market participants expect Jerome Powell to provide more information on the pace and scope of monetary policy tightening. If the Fed chief avoids being specific, even after an aggressive but predictable 50-point rate hike, the XAU/USD could strengthen to the 1900.00 level as early as this week. The start of a balance sheet reduction would also not limit the upside potential of the pair. Another strong driver for gold could be formed if Powell starts to discuss a recession and admits a slowdown in future rate hikes.
At the same time, according to the largest derivatives exchange, the Fed might raise rates by 50 basis points not only in May but also in June and July. Moreover, a number of experts have already suggested a 0.75% hike at the next meetings. If the Fed announces it is ready to accelerate the pace of tightening and announces the approximate dates and volumes, the US dollar will strengthen all-round and many investors will abandon gold as a risk diversification tool.
Today between 14:15 and 16:00 (GMT+2), the US will release a number of important macroeconomic indicators, which may cause a spike in volatility in the market. The Fed meeting will start at 20:00 (GMT+2).

Support and resistance levels

On the 4-hour chart, the instrument is consolidating in a limited price range of 1860.00- 1878.00. The indicator is pointing downwards and the price range has contracted, indicating that the weak uptrend is about to change to a downtrend. MACD histogram is in the negative zone, keeping a sell signal. Stochastic is correcting in neutral area, no signal to open positions has been formed.

• Support levels: 1807.00, 1828.25, 1845.00, 1863.80.
• Resistance levels: 1875.70, 1885.50, 1900.90, 1912.05, 1928.90, 1945.70.

Trading scenarios

• Short positions should be opened below 1860.00 with a target of 1805.00 and stop loss at 1889.80. Implementation period: 1-2 days.
• Long positions can be opened above 1890.00 level with target 1929.00 and stop-loss at 1870.00 level. Implementation period: 1-2 days.