Weekly reviews

Fed confirmed hawkish position, however US dollar gain has stopped today

Yesterday, the Federal Reserve completed the two-day meeting and presented the markets with its results. As expected, Fed left the key rate unchanged and kept it in the range of 1.00-1.25%. However, despite weak inflation indicators, the US Central Bank signaled its readiness to raise the rate again this year, which was unexpected for the markets.

In the accompanying statement, the Fed once again noted the positive situation in the labor market, as well as a balanced growth in economic activity. Long-term inflation expectations have not changed. The consequences of recent hurricanes can cause a price rise for gasoline and some other goods, as a result - inflationary pressure will temporarily increase. However, in annual terms, inflation will remain below the target level of 2%.

Thus, US dollar gained throughout the entire spectrum of the market, and gold lost about 0.8%.

Perhaps this is what most investors wanted to hear. In the accompanying statement, in particular, it is reported that the Fed sees the range of rates in the region of 1.25-1.50% appropriateby the end of 2017. The position of the regulator was clear. All other arguments about a strong labor market, temporary factors of low inflation have already been learned by markets.

Another important factor, which had a positive impact on the US dollar, was the announcement of a reduction in the Fed's balance sheet, which will begin in October. The overwhelming majority of analysts expected this decision, but the markets had to hear about the actual adoption of such a decision. Starting in October, the balance will be reduced by $ 10 billion a month. Of course, for a balance of $ 4.5 trillion, this is negligible, but given the balanced policy and gradual steps of the Fed, and this is already quite good. The reduction of government bonds will be 6 billion, and another 4 billion will be reduced mortgage debt on a monthly basis.

As expected, the results of yesterday's trading turned out to be negative for gold. The gold market fell to 1296 on Thursday, but managed to rebound, and finished trading above the key $1300 per troy ounce level.

In general, everything is natural. The general rhetoric of the Fed was a "hawkish" and it provided the dollar with substantial support. What's interesting now is how long will the strengthening of US dollar last?

This question is especially relevant now, when gold is trading near the important level of 1300.70. This level was an important resistance, which can now become a good support.

Thursday trading started for gold the same way as the end of the previous session, downward impulse resumed, but then it slowed at 1294. There is a 50 exponential moving average running at 1294.85, which can provide good support as well. If this does not work, the moving will be broken and today's trades will end under it, we should expect further decline to 1281.10, 1276.34 and 1267.26.

Upward impulse and close above 1300 will signal the end of the corrective pullback and a likely the resume of general upward trend.

Today, European stock markets are trading in the green. The growth is led by the banking and financial sectors. In contrast, futures for US indices are in the red zone.

Brent oil market came close to the medium-term resistance of $ 56.60 yesterday. According to OPEC, the implementation of the plan to reduce production in August was estimated at 116%. Data of the US Energy Department showed a decrease in reserves of 2 million barrels. Nevertheless, the strengthening of the US dollar is a negative factor for the oil market; in addition, there is a strong strategic resistance level around $ 56.60. In the focus of the oil market, the meeting of OPEC representatives.

chartchartchart