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The Fed raised the caution instead of the trust

Discussion in 'Current Market Sentiments' started by fx-recommends, Sep 21, 2015.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    · The global equities markets are still suffering from worries about facing global economic slowdown, after the Fed has chosen to keep the fund rate unchanged between 0 and 0.25% last Thursday.

    · The Fed has emphasized on the growth downside risks in US because of the global economic slowdown, while there is no pressure yet on the Fed to hike the interest rate for containing the inflation which is still tame with no evidence yet to show that it is ascending to reach the Fed's 2% yearly inflation target.

    · Most the market participants as expected have seen in the decision undesirable dovish message can trigger worries about the economic performance of US which could grow by 3.7% annually in the second quarter.

    · While the US labor market could show also ability to improve further by driving the unemployment rate down to 5.1% last August which is the lowest level since April 2008.

    · The US housing market could send different positive signs this year by relatively strong rising of housing starts and building permits.

    · While the impact of the oil prices falling can diminish later next year to watch higher broad inflation figures and also higher core figures.

    · There are also few worries about the current tame inflation pressure, as the economy is still in an up cycle, the wages can boost the prices later.

    · The Fed was able to start tightening taking this low inflation level as a reserve can help it later to halt hiking in the case of facing economic slowdown, as there is no high inflation pressure on it to raise rates.

    · But despite these factors, the Fed could not be able show higher trust in the economy by hiking the interest rate for the first time since 2006.

    · The Fed's decision to refrain from hiking spurred selling pressure in the equities market and also higher demand for bonds dampened the yields of the US treasuries.

    · By maintaining its accommodative stance unchanged for longer time, the Fed has given leeway for speculations saying that the Fed is watching concerns we do not see lowering the trust in the US economy instead of driving it up.

    · By the same way, the markets got along with the dovish worrying message about the global economy sending the energy prices down shrugging off the benefits of keeping the interest rate at the current low level in US which can encourage the business spending for longer time by lowering the cost of borrowing.

    · The cautiousness of the Fed could easily put pressure on the greenback versus its rivals by lowering the interest rate outlook differential which was supporting the US dollar obviously in the first half of this year.

    · The gold could be boosted by the dovish risk off sentiment and also by falling of the interest rate outlook in US to maintain trading near $1137 per ounce in the beginning of the new week, after rising from $1100 area because of this decision.

    · The Gold daily Parabolic SAR (step 0.02, maximum 0.2) is reading today $1101.19 in its third day of being above the trading rate following last Thursday rising which has been triggered by the Fed's decision.

    · The gold is having now a higher low at $1098.86 above last May. 20 low at $1073.95 which has been the lowest level since Feb. 7,2010.

    · Technically, XAUUSD is in need now to get over $1170 to contain the falling from it to $1198 and to gain higher upside momentum to take it out from the possibilities of having another lower high over the short term.

    · As the gold has already fixed its oversold stance over the short term charts and that can keep it exposed to another downside impulsive wave.

    · God willing, the Gold next resistance can be at $1147.56, before $1170 which can be followed by $1188.38 before facing higher resistance at $1205.63.

    · While the falling again can be met by supporting level at $1115.40 before $1098.86 which can be followed by $1173.95 which is still the lowest reached level since forming it's all times high at $1921 which has been recorded in September 2011.

    · Anyways, The way up is still in need for more reasons to take place technically, while the falling below $1173.95 can open the way to more downside momentum to test Jan .31, 2010 bottom, before facing the psychological level at $1000 per ounce.

    Have a good day

    Kind Regards

    FX Market Strategist

    Walid Salah El Din

    Mob: +20 12 2465 9143

    E-Mail: mail@fx-recommends.com


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