19th September 2019 - The Fed drove Gold down below $1500 per ounce

Walid Salah Eldin

Active member
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BOJ preferred today to not join the central banks easing chorus sending USDJPY down during the Asian session to be traded close to 107.80, after reaching 108.47 following the widely expected Fed's decision to lower its fund rate by 0.25% again, scoring its first back to back cut since 2008.

Following this decision which was not taken unanimous again as 2 members were preferring no cut, The Federal Reserve Chairman Jerome Powell mentioned in the beginning of his press conference that The decision has been taken today as "insurance against ongoing risks" not as “mid-term policy adjustment” as what he said following last July 31 meeting when he warned against expecting long U.S. monetary easing cycle.

Fed projections have shown that 7 of 17 officials saw the need for further 0.25% cut by this yearend and no forecast for more than one rate cut this year shocking who were looking forward for more cuts this year. The projections were good news for UST 10 yr yield which rose above 1.80%, while gold retreated to $1484 per ounce, before stabilizing near $1490.

The Fed has taken also an action to fix the recent volatility in US money markets by lowering The interest rate on excess reserves by 0.30% to improve the market functioning .

Powell said “If we experience another episode of pressures in money markets, we have the tools to address those pressures,” putting the option of widening the balance sheet back again on the Fed's table, when it is to look for sustaining the expansion, boosting the inflation rate, combating the lingering headwinds of weaker global growth and against the current higher geopolitical uncertainty,

Powell assured on The Fed's acknowledge of the current strong labor market and consumption, but it is still worried about investment, exports and the current clearly muted inflation rate which is expected to rise later to The Fed's 2% yearly target.

The Powell indicated that There’s no monetary policy preset course and the Fed is to remain dependent on data, But if the economic expansion is to falter after growing by 2.5% in the first half, the Fed is “prepared to be aggressive” and “more extensive sequence” of rate cuts could be appropriate to stimulate the economy and boost inflation which was up in July by only 1.6% y/y based on the Fed’s preferred gauge PCE.

XAUUSD-Daily-19-09-2019 06-52-58 ص.jpg

After sliding from its formed peak at $1557.03 on Sep. 4, XAUUSD is still showing ability to stand close to $1500 per ounce psychological level in its eleventh consecutive day below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1520.

XAUUSD is still keeping existence above its daily SMA50 and it is still underpinned over longer range by continued existence above its daily SMA100 and its daily SMA200.

The daily chart of XAUUSD shows that its RSI-14 is now inside its neutral area reading 47.986.
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 34.638 and leading to the upside its signal line which is reading now 32.075, after positive crossover inside the oversold area below 20.

Important levels: Daily SMA50 @ $1481, Daily SMA100 @ $1409 and Daily SMA200 @ $1351
The Closest Experienced S&R:
S1: $1479.93
S2: $1381.80
S3: $1319.61
R1: $1557.03
R2: $1616.62
R3: $1697.10

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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