Gold turns lower after BOJ, eyeing Fed for a firm near-term direction

In a knee-jerk reaction to BOJ monetary policy decision, Gold reversed sharply from a 5-day high and dropped to $1308 but held its near-term trading range and has now stabilized around $1311-12 area. 

At its latest monetary policy meeting, Bank of Japan left rates unchanged at -0.1% and kept monetary policy base unchanged at 80 trillion Yen. The market initially seemed disappointed as the expectations were pointing that the central bank would take interest rates farther into negative territory and announce additional monetary stimulus measures. 

After an immediate bullish spike, the Japanese Yen quickly reversed all of its strength and tumbled across the board, boosting demand for the greenback and eventually capped any recovery for the precious metal. Hence, focus would remain on the Fed monetary policy decision, scheduled to be announced later during NY trading session on Wednesday, which would help investors determine the near-term trajectory of the greenback and trigger the next leg of direction move for dollar-denominated commodities - like gold. 

Technical levels to watch

On a sustained weakness below $1310 level, the commodity seems to immediately head towards testing 100-day SMA support near $1305, which if broken would open room for further near-term depreciating move. Meanwhile on the upside, a decisive strength above $1318-20 resistance area might negate near-term bearish bias and lift the metal back towards $1330 resistance area.