FOMC puts pressure on commodities

2 August, 2018

There were no surprises today when it came to the US interest rate decision with interest rates remaining flat on 2%. The big surprise, however, was that the FED was not more upbeat than usual, which markets had kind of expected. For now the focus from the FED remains firmly on maximum employment in the US as well as systematically focusing on that 2% inflation goal. Funnily enough the FOMC did not mention the trade risks at hand as the US looks to raise further tariffs on China again, which is also likely to impact the dollar in the short term. Despite the tariffs the US economic situation is such that it continues to expand at a pace and the American economy is for the most part looking very strong and the market's attention will now shift to the upcoming non-farm payroll figures due out on Friday.

One of the big losers so far though has been gold which continues to find itself under sustained pressure on the back of USD strength, and as investors believe the economy is likely to keep expanding come what may of the tariff situation. It seems very much likely that the USD will continue to strengthen as traders move into the US dollar as interest rates pick up. This will add further pressure on gold, as the once famous hedge continue to lose its shiny allure to the gold bugs in the market.

Looking at gold on the charts and the technical pressure from the bears is really having an effect with gold finding no relief since April this year, it has been a slow and steady bearish motion which is continuing at present. With gold moving lower and looking like it may touch resistance at 1213 the market will be checking to see if it can still hold on a third touch. If it does indeed hold out, I would be watching non-farm on Friday as this could be the catalyst that sends it crashing through to the next level of support at 1189. Resistance levels can also be found at 1240 and 1258 as well, if the bulls decided to come back into the market, though at present it may be a hard ask.

The other key player in the market worth watching at present is the USDCAD which has found itself under pressure again. This is currently going against the grain as the USD has strengthened and oil prices have fallen at the same time.

On the charts the USDCAD is looking to test support at 1.2960, which also intersects with the 100 day moving average, so we could find the bulls very resilient around this sweet spot. If we do see a solid bounce higher then resistance can be found at 1.3041 and 1.3101 as well, but it maybe that USD bulls here are waiting on non-farm before really having a push.


Source  
Q2 set to end on risk-on note30 Jun, 2020  

Asian stocks are advancing on the final trading day of June, after a positive session on Wall Street, with market sentiment buoyed further by China’s better-than-expected June PMI readings.

Beware Quadruple Witching: More volatility ahead?19 Jun, 2020  

Heightened volatility has been a staple of US equities since March, with the VIX index staying stubbornly higher compared to its long-term average of sub-20 levels...

Will the second wave of Covid-19 end the current rally?19 Jun, 2020  

It has been one hundred days since the WHO declared the coronavirus outbreak a pandemic. During this time, we experienced the worst sell-off and fastest...


To believe or not to believe in virus vaccine hopes?20 May, 2020  

The euphoria that roared across financial market sentiment throughout yesterday and encouraged huge rallies in major U.S stock markets is running thin on flames today...

Gold blasts to new highs but can this joy last?19 May, 2020  

Investors are happy to add risk into portfolios with stocks and oil prices cheering this sentiment but at the same time, gold has reached its highest level...

Will the clock unveil more COVID-19 cases as restrictions ease?12 May, 2020  

Market volatility remains muted, however the crossroads appear to be getting closer where questions will be asked if eased restrictions are contributing...


Sell in May and go away?4 May, 2020  

On Covid-19 related news, states across the US are taking steps to restart the economy by easing stay-at- home orders and allowing non-essential businesses to reopen...

Will markets follow Pied Piper Powell?29 Apr, 2020  

The Dollar is weaker against all G10 and Asian currencies ahead of today's Fed rate decision and the US Q1 GDP announcement. The Dollar index (DXY) has been...

Gold dives despite market turmoil while Dollar surges22 Apr, 2020  

Gold struggled to shine on Tuesday, falling more than 1% as chaos in the oil markets triggered panic selling across the board and forced investors...