10th January 2019 - The Gold is still looking shining

Walid Salah Eldin

Active member
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The US dollar could pare some of yesterday losses which have been spurred by series of dovish comments from the Fed officials.
EURUSD is now trading near 1.1520, after reaching 1.1569 and the pair is still well-exposed to testing of 1.15 psychological level as a supporting level has been forming previously resistance in front of the pair on last Nov. 7.
St. Louis Fed Governor James Bullard warned about the growth downside risks, if the central bank is to keep raising the Fed Fund rate, Bullard has said previously on last Dec. 7 that The Fed should pause this current tightening cycle.
Atlanta's Bostic asked for patience for evaluating the economic risks clearly saying that The Fed doesn't need to 'keep our foot on the gas pedal' anymore.
Cleveland Fed Governor and last year FOMC member Loretta Mester said that the central bank could stop hiking rates this year, if inflation doesn't rise adding that "The economy is going to be telling us where we are". she indicated also that the Fed could later reconsider its rate hike projections which were referring to more 0.25% hikes this year following last Dec. 19 meeting she joined when it decided to raise its fund rate for a fourth time in 2018 lowering its rate hike projection for 2019 from 3 it expected last September to only 2.
While Fed chief Governor Jerome Powell assured on that "data dependency" working principal indicating that the Fed may change its course, if data are not to be in consistency with The Fed's projections in 2019

The released Minutes of The FOMC meeting on Dec. 18 and 19 have shown that the members raised rates as there are some crosscurrents with some signs of economic softening but that anyway have not fundamentally altered the outlook.
The Committee said that risks to the economic outlook are "roughly balanced", vs. the "appear to be balanced," statement it was saying before.
The Fed expected US GDP annual growth to slow down to 2.3% in 2019 from 2.5% it was expecting following last September meeting, expecting the inflation to edge lower below its 2% PCE yearly target, after it has been seeing probability of rising above this level in 2019 last September.
The Fed's message was the first dovish signal following hiking rate but most of the markets participants have not seen it dovish enough amid the current equities sell off.

It was a must to see the Fed praising the economic current stance, the labor market performance, after hiking the interest rate again. this was the best they can do for equities after raising rates again.
It cannot tell about rising of the economic downside risks. So, it raised rates!
This cannot be expected with a decision of hiking the interest , but the days passed and the Fed's governors did not waste a chance without telling about revising of their projections and the probability of halting rates for a while.
I see this is the best they can do for equities with no materialized released data yet warning about economic setting back and we have seen by the end of last week how Dec Labor report was telling that the Fed was right to far extent amid rising of the wage inflation pressure has been the strongest since April 2009 and upbeating Jobs adding out of the farming sector was the highest since last February.

This current market sentiment is surely favorable to The precious metals and their buyers who are looking for hedge against inflation, risk aversion demand or topping of the tightening cycle.
The palladium is now near all times high it recorded yesterday at $1341.91 per ounce and Gold is trading closer to $1300, while the industrial metals are still suffering from the woes of lower global economic expectations.
As the Fed is looking to respond positively to Wall Street Equities investors who are asking for lower interest rate outlook the Fed has already shown driving down UST yields putting pressure on USD.
In some selloff times, they dared to ask for immediate halting of this current tightening cycle, despite the main street economic activity which is still running well fueling inflation.
It is not expected now from Jerome Powell to say any more that "equity volatility is only one of many factors that the Fed takes into account", after the Fed conflict with the market and Trump who became more eager in ending his conflict with China over trade to reach a deal can boost equities, after continued blaming from his side to the Fed which eroded his reflation plans effects by keeping raising rates causing Equities slump.

XAUUSD-Daily-10-01-2019 05-48-56 م.jpg

The gold is still trading now close to $1290 per ounce, After facing difficulty to surpass $1300 psychological level, following forming series of higher lows drove it higher above its daily SMA50, its daily SMA100 and its daily SMA200
XAUUSD is trading now in its day number 16 of consecutive being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1279.

The daily chart of XAUUSD shows that its RSI-14 is now inside its neutral area reading 66.702 coming down from its overbought area above 70.XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its neutral territory reading 57.971 and leading to the upside the signal line which is lower in the same region at 53.469, After positive crossover inside the neutral region by stepping on $1276.65 per ounce.

Important levels: Daily SMA50 @ $1242, Daily SMA100 @ $1224 and Daily SMA200 @ $1249

The Closest Experienced S&R:
  • S1: $1276.65
  • S2: $1253.46
  • S3: $1232.95
  • R1: $1298.61
  • R2: $1309.33
  • R3: $1325.91

Have a good day

Kind Regards
Global Market Strategist of FX-Recommends
Walid Salah El Din
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