9th November 2018 - The Fed's assessment made the greenback much more attractive

Walid Salah Eldin

Active member
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As expected, The Fed held its fund rate range unchanged between 2% and 2.25% opening the door opened for raising the interest rate by another 0.25% later next month by assuring on the current continued strengthen of the economic activity, Household spending and labor market growth.
The Fed mentioned assured again on that the inflation broad figure and underline figure without food and energy remain close to the Fed symmetric 2% medium term target, while risks to the economic outlook appear roughly balanced.
The Committee indicated that The Fed fund rate gradual pace of tightening will remain consistent with sustained economic activity expansion, strong labor market conditions and inflation near the Fed symmetric 2% medium term target.

The Fed could halt the US equities rebounding by maintaining its gradual pace of tightening without mentioning the sell-off the equities faced last month.
The Fed looked unfazed of the US equities recent meltdown which has started on last Oct. 10. It was expected from The Fed which has warned previously during Yellen's Mandates about overloading unreasonable risks in the financial sector depending on the Fed's accommodative stance.
The comments which came out from Fed's Governors during this recent US equities meltdown were not to spark new buying as they were for calling for looking into the strong economic fundamentals of US.
There was no press conference of Jerome Powel following that FOMC meeting but the its assessment looked similar to the upbeat economic assessment The Fed vice chairman Richard Clarida delivered in his earlier maiden speech.
When he indicated that he backs further gradual rate hikes by The Fed which is now at the closest point in a decade for meeting its twin goals of full employment and price stability.
The Fed has not praised or welcomed the Equities volatility but its stance shows that it knows that this volatility can be important for equities the investors who need to be selective relying on the shares fundamentals, when they are to take their decisions next specially after the Fed ended its accommodative stance getting into neutral stance.

S&P 500 is now standing close to 2800 figure, after facing repeated resistance near 2820 capped its rebounding which has been underpinned by Warren Buffett's revealing of his will to buy back his Berkshire Hathaway Inc firm’s shares.
The Fed economic assessment which weighed down on the risk appetite could send the UST yields up boosting demand for the greenback across the broad weighing down on the commodities and energy prices.
WTI is now trading close to $60.85 per barrel, after diving below its previous supporting level at $61.30, while gold is trading just below $1220 per ounce.

The gold has been boosted to reach $1237.25 following the release of Gold council quarterly report which has shown that The Gold demand was 964.3t in Q3, just 6.2t higher yearly
The rising was mainly on rising of central banks buying by 22% year on year which has been the highest scale of rising since 2015 leaded by Russia which raised its buying by 92.2t to have now more than 2000t for the first time, followed by Kazakhstan and Turkey which covered its lira weakness by 25% in the third quarter by well-known defensive action of buying gold to cover its currency printing and outflows.
In the same period, North America accounted for 73% outflows from ETFs gold backed securities on risk on sentiment and rising of USD cost of borrowing made the gold less favorable to be hold.

The gold is now trading in its sixth day of retreating, after being satisfied by reaching only $1237.35 without breaking its formed resistance at $1243.20 on last Oct. 26.
XAUUSD extended its slide to be trading now just below $1220 in its second day of being below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1242.
XAUUSD is still above its daily SMA50 and above its daily SMA100, but below its daily SMA200.
XAUUSD found it easier to be traded aside near this level, after forming a higher low on last Aug. 24 at 1182.82 above its formed bottom on last Aug. 16 at 1160.24.
The daily chart of XAUUSD shows that its RSI-14 is in a lower place inside its neutral area reading 49.230.
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 28005 and leading to the downside the signal line which is higher in the same region at 44.361 showing abating upside momentum, After negative crossover inside the neutral region.

Important levels: Daily SMA50 @ $1210, Daily SMA100 @ $1216 and Daily SMA200 @ $1266
The Closest Experienced S&R:
S1: $1211.98
S2: $1182.82
S3: $1160.24
R1: $1243.40
R2: $1265.93
R3: $1272.88

Have a good day

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


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