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Gold Price Jumps and USD Slides after Dovish Signal from the Fed

Gold Price Jumps and USD Slides after Dovish Signal from the Fed

Nathalie Huynh,

Talking Points:

  • Gold price jumped on prospects of slower interest rate trajectory in 2016
  • Oil price rose as USD slid, a lower than expected inventory data also provided support
  • Copper price retraced its topside despite Fed’s concerns on global growth

The US dollar declinedand commodity prices roseafter the U.S. Federal Reserve’s Open Market Committee held off from raising borrowing cost. Oil pricestayed elevated above $38 in Asian trade. In a press conference following the meeting, Fed Chair Yellen downplayed the effect of low oil price on the central bank’s policy decision. As oil price stabilises, she stated, the pressure should be removed from headline inflation. A lower than expected crude inventory data from U.S. Department of Energy also supported oil price gains.

Gold price bounced back up above $1250 and US dollar dropped over 1% against G10 currencies after the Fed meeting. Apart from a dovish growth outlook, the Committee also lowered its median projection of interest rate at the end of 2016 to the equivalent of two quarter-point increases, from four increases projected in December. The prospects of “lower for longer” interest rate trajectory likely revives interest in gold.

Copper price followed other commodity prices to retrace the topside around 2.2690. The metals complex posted gains today, momentarily ignored the Fed’s concerns on slowing global growth and financial instability. However this negative outlook might return to trouble copper investors later.

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GOLD TECHNICAL ANALYSIS – Gold price rose above the 10-day moving average at 1254.9 today and has so far retained these levels. Further topside development could be expected during today’s session, given apparent upward momentum signals.

Gold Price Jumps and USD Slides after Dovish Signal from the Fed

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price was still contained within the 2.1485-2.3020 range, albeit an upside bias today. The emerging upward momentum may lead copper to test its resistance level at 2.3020 in due course.

Gold Price Jumps and USD Slides after Dovish Signal from the Fed

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS Oil price made a clean breach above a recent resistance level at 38.36 - which has now turned into support level. This opens up the whole upper area toward $40 mark, and is a good sign for the bull traders. Traders should still exercise caution and stop loss should not deviate too far from support level.

Gold Price Jumps and USD Slides after Dovish Signal from the Fed

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Losing Money Trading Forex? This Might Be Why.

Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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