FUNDAMENTAL
OVERVIEW
Gold strengthened following the FOMC decision despite three dissenters
voting for a rate hike. The consensus was that Fed’s Logan and Fed’s Hammack
would prefer a rate increase, but we also got Fed’s Kashkari.
I guess the fact that Fed’s Kashkari is a hawkish member, combined with the
roughly 30% probability of a rate hike that was priced in before the release,
led to some hedges getting unwound, even though nothing has changed in the
bigger picture. The post-decision gains were eventually fully erased.
Fed Chair Warsh didn’t offer any clues about the next meeting as he
continues to limit forward guidance. Therefore, the next big event will be the
US CPI report on the 12th of August as the data will likely decide
whether the Fed hikes in September or not.
On the geopolitical side, the situation in the Middle East has barely
changed, although Trump’s rhetoric seems to have softened a bit. Nevertheless,
until we get a clear de-escalation, inflation risks will remain skewed to the
upside.
Yesterday, gold got a boost from strong selling in the US dollar as Japan
and South Korea intervened in the FX market. The moves in the USD/JPY pair were
massive. Those flows spilled over to other markets which coupled with month-end
trading made for a very noisy and volatile day.
All in all, we are fundamentally in the same position we were before the
FOMC meeting, so now it’s just about waiting for the US CPI and the US-Iran
developments.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold is breaking above the downward trendline. We can expect the buyers
to step in around these levels with a defined risk below the broken trendline
to position for a rally into the next trendline around the 4,400 level. The
sellers, on the other hand, will want to see the price falling back below the trendline
to pile in for a drop into the 3,885 level next.
GOLD TECHNICAL ANALYSIS – 4
HOUR TIMEFRAME
On the 4 hour chart, we can
see the price action has been mostly rangebound since late June, and this
leaves traders with little to do other than waiting for technical breakouts or
fundamental catalysts. The buyers will need the price to break above the 4,200
resistance to gain more conviction for a reversal of the trend. The sellers, on
the other hand, will likely step in around the resistance with a defined risk
above it to position for a drop into the 3,885 level.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, we
have a minor resistance zone around the 4,120 level where the price got
rejected from several times in the past weeks. The sellers will likely step in
around the resistance with a defined risk above it to keep targeting new lows,
while the buyers will look for a break to increase the bullish bets into the 4,200
resistance. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we conclude the
week with the US Q2 Employment Cost Index. Traders will also keep monitoring
US-Iran developments.
This article was written by Giuseppe Dellamotta at investinglive.com.