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16 September 2020

Gold, oil, yen, improve positions ahead of the last pre-elections Fed decision

The Federal Reserve is expected to leave its policies unchanged in its last elections before the elections. The Fed publishes new forecasts for growth, inflation, employment, and rates. These projections and Federal Reserve Chairman Jerome Powell’s tone are set to rock markets.

Concerns of a slow recovery without imminent action may hurt sensitive markets. The world’s most powerful central bank may also shed more light on its new policy framework which focuses on employment and allows inflation to overheat.

The Federal Trade Commission (FTC) has reportedly opened an antitrust probe into Facebook’s practices. That development is weighing on tech stocks and may impact currencies as well.

Gold has been stabilizing on higher ground, rising with equities. It is also waiting for the Fed for the next move.

Oil prices have been on the rise as hurricane Sally is advancing in the Gulf of Mexico and has already triggered the shuttering of some installations. Private inventory data has shown a drawdown, also supporting crude prices.

USD/JPY is trading closer to 105, extending its gradual losses and losing its inverse correlation with stocks. Yoshihide Suga has officially assumed his position as Prime Minister, replacing his long-serving boss Shinzo Abe.

EUR/USD is stable around 1.1850, Ursula von der Leyen, President of the European Commission, delivers her wide-ranging State of the Union speech later on Wednesday.

UK Prime Minister Boris Johnson is trying to soothe concerns about his controversial Internal Markets bill. The legislation knowingly violates the Brexit accord with the EU, angering both the bloc and his fellow Conservative Party members. The bill passed the first hurdle and is set for a second vote next week.

UK inflation beat estimates with 0.2% yearly in August. Inflation figures are due out from Canada

Gold to test $2000 on dovish Fed’s economic projections and dot plot

“On Tuesday, the price closed in the red but finally found acceptance above the critical $1950 level for the second day in a row, having recaptured the 21-day Simple Moving Average (DMA), now at $1944.30. With that, the price trades above all major DMAs alongside a bullish 14-day Relative Strength Index (RSI), currently inching slightly higher at 54.95.”

“Should the Fed turn out more dovish than expected, the metal has a room for a test of $2000. However, a closing above critical resistance around $1973 is needed for additional upside.”

“Alternatively, the price could drop back towards the upward-sloping 50-DMA at $1929, below which the September 8 low of $1906 could be put at risk. A daily closing below the latter would prompt the resumption of the corrective declines from record highs of $2075.”

AUD/USD clings to modest gains above 0.7300 mark, focus remains on FOMC

The AUD/USD pair edged higher through the early European session and was last seen hovering near the top end of its daily trading range, around the 0.7315 region.

Following the previous day’s pullback of around 40-45 pips from near two-week tops and a subsequent dip to the 0.7285 region on Wednesday, the pair regained traction and turned positive for the fourth consecutive session.

The global risk sentiment remained well supported by the latest optimism over a potential COVID-19 vaccine. The risk-on mood undermined the US dollar’s safe-haven status and benefitted the perceived riskier Australian dollar.

Meanwhile, the upside is likely to remain limited, at least for the time being, as investors might refrain from placing any aggressive bullish bets ahead of the highly anticipated FOMC monetary policy decision later this Wednesday.

This makes it prudent to wait for some strong follow-through buying, possibly beyond the overnight swing highs, around the 0.7340-45 region, before positioning for a move back towards reclaiming the 0.7400 round-figure mark.

Heading into the key central bank event, the release of the US Monthly Retail Sales figures might influence the USD price dynamics. This, along with the broader market risk sentiment, will help traders grab some short-term opportunities.

WTI: Selling opportunity at 38.70

WTI Crude

WTI Crude September Future beat strong resistance at 3780/3800 to target a selling opportunity at 3870/3900, with stops above 3940.

Daily Analysis

WTI Crude shorts at selling opportunity at 3870/3900 target 3840/30 with first support at 3800/3780. A break below 3760 targets 3720/30. Below 3710 look for 3680/70 before support at 3600/3580. A break below 3540 is the next sell signal initially targeting 3460/40.

Selling opportunity at 3870/3900, with stops above 3940. A break higher targets 3985/4000.


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