The XAU/USD pair has been trying to form an ascending channel on the 4-hour chart and yesterday prices pulled back to the bottom line which coincided with the support level of 1444. This level has produced a bit of a bounce so far -helped by Federal Reserve's quantitative easing and weaker than expected U.S. data- but the pattern on the daily chart still shows that there is more resistance to the upside. Yesterday, figures released from the Institute for Supply Management showed that its index of manufacturing activity fell to 50.7 from 51.3 a month earlier and data released by the ADP Research Institute revealed that private sector added just 119000 jobs in April, much less than expectation of 150000. The FOMC decision was cautious and neutral as expected. Fed policy makers said asset buying will continue “until the outlook for the labor market has improved substantially”. The Federal Open Market Committee also said “The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes” at the conclusion of a two-day meeting. That means future policy decisions are data dependent. Gold market had a limited reaction the Fed's announcement but that was not so surprising because investors are in a cautious mode ahead of the European Central Bank meeting. Since the weekly and daily charts still remain bearish, I think the bears will try to take advantage of that.
Today the key levels to watch will be 1486 and 1444. The bulls will have to break above an interim resistance at 1467 before challenging the bears at 1486. If they successfully push price above this barrier, there is a possibility that we can visit 1498 and 1505. If the bears increase the downward pressure and drag the pair below 1444, I will be looking for 1430, 1411 and 1398. A close below 1398 means we are back below the Ichimoku cloud. If that happens, I believe 1363 will be the next stop.