Investors expect that the will signal a pause in its tightening cycle on Wednesday, citing economic and probably political risks. A more cautious tone is priced in already but could increase the selling pressure on the greenback, depending on the tone of the Fed’s official statement. In this scenario, gold may proceed with the rally despite the oversold conditions in the short-term charts.
As for the current picture, the USD pressure has abated now, in part due to a cautious optimism ahead of a new round of trade talks between the US and China this week. Another event that will affect the dollar direction in the days to come is the US NFP employment report due on Friday. Weaker than expected figures could add to the upside pressure in gold prices, but the bullion is yet to confirm a breakthrough and avoid a wave of profit-taking after a strong rally.