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Abstract: The Fed left interest rates unchanged as widely expected by the market, but hinted at further rate hikes before the end of the year, pushing gold prices down to their lowest point in nearly three months.

Fundamentals

The June meeting of the U.S. Federal Open Market Committee (FOMC) continued to focus on inflation as it remained below expectations. Further policy tightening may be needed in the coming months, but the stronger-than-expected performance of the U.S. economy leaves room for further increases in borrowing costs.

The Fed's hawkish signal boosts the U.S. dollar, making gold less attractive to investors and thus increasing the downward pressure on gold prices.

Before the New York session opened, gold prices continued to remain under pressure, trading at the lowest level in three months below $1,930. Although gold prices rebounded sharply to $1,943 after the European Central Bank made another decision in line with market expectations, it remains within a downward trend. This indicates that gold prices continue to have a bearish bias for now.

The recent weakness broke below the strong support provided by the 100-day SMA ($1,942), which had been repeatedly challenged by bears over the past few weeks, increasing the significance of the support.

Currently, traders believe that it is not an exaggeration to say that there is a possibility of a widespread exit by bulls after the gold price broke below the support at $1,942, suggesting a shift to a downward trend. However, it is important to note that this notion of a widespread exit by bulls may be overstated.

We believe that in the short term, gold prices will continue to trade within a range as bears test the previous buying levels (inside the ellipse). The completion of profit-taking by bears is likely to trigger a counterattack by bulls. These buying levels (inside the ellipse) are sufficient to push gold prices back above the $1,960 level in search of mean reversion. But one thing is for sure: the bulls will not break through the downward pressure line to ensure the downward structure is intact. This is why the above-mentioned gold prices will continue to have a bearish bias.

Technical Analysis

On Wednesday, gold was unable to maintain its strength above the $1,965 mark and then fell sharply below the previous $1,932 mark.

Although mixed technical signals in the 4-hour chart did not provide a clear direction, investors are hoping to see a closing price above the downside limit of $1,950 before shifting their focus to the upside resistance at $1,964.

It is worth noting that the 23.6% Fibonacci retracement of the $2,079-$1,932 downtrend is also located here. If this level is broken, the price could accelerate toward the 200-week SMA and the 38.2% Fibonacci level at $1,987. A breakthrough at this level would indicate the completion of the structure test for wave 4 by the bulls. However, the bulls were unable to achieve this and thus retreated. The focus will now shift to lower levels at $1,932 and $1,920.

The price approaching the expected test near the daily low of $1,924 during the New York session is also noteworthy.

As of the time of writing, gold prices are still moving sharply higher after testing the prior (in-ellipse) buying, currently at $1,955. The previous expectation that the average price will rise sharply is also in line with expectations. For this reason, prices are rising close to the end of the upside resistance at $1,960. The original trading strategy of buying the dips has now shifted to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 1964

Target Price: 1872

Stop Loss: 2000

Valid Until: 2022-06-29 23:55:00

Support: 1950, 1942, 1932

Resistance: 1964, 1970, 1983