Gold, Oil and FX Markets – What Comes After the Fed Meeting?

Economic data released and expected today
 
Today, the Australian retail sales data for June came in at 0.2%, down from the previous month of 0.7% and lower than the expected 0.5%.
 
Today, investors await the final German inflation data for July at 4:00 pm UAE time, which is expected to come in at 7.4%. Eyes will also be on 4:30 pm at the US GDP data, this data reveals whether the US economy is in technical recession (a contraction achieved in two consecutive quarters) or not.
 
The Federal Reserve raised US interest rates yesterday by 75 bp towards 2.25% - 2.50% range and acknowledged clear indications of a decline in consumer spending and production together. In return, Fed chairman Powell stressed the “robust” labour market conditions and the commitment to pushing inflation levels back to the 2% target.
 
Indices and Bonds
 
Prices of European stock indices and futures contracts for the US indices fell today by 0.1%- 0.5%. It’s worth noting that markets think that the Federal Reserve may start reconsidering its policy, especially after the Feed chair statements that the future hikes will depend primarily on economic data, and possibly smaller would be delivered
 
Today, the US 10-year bond yields rose by 0.4% yet the daily candlestick keeps failing to close above 2.81% and this keeps the odds high for a decline towards 2.50%. The inversion of the yield curve also continued, but the difference between US10Y and US2Y decreased to only 20 basis points. The Fed is likely to continue raising interest rates at a slower pace, reaching 3.50% by the end of 2022, and then a rate cut could take place by the end of the second quarter of next year.
 
Major FX Currencies
 
The US dollar index fell today by 0.3% and yesterday by 0.6%. The reason is that the market buys the rumor and sells the news ie, the market had already priced in hiking interest rates by 75 bp and then sold the fact after it happened.  
 
 Investors will get more clarity from inflation reports in August and September and Fed members’ speeches that may confirm (or not) a rate hike of 50 bp September meeting, 25bp in November and 25pb in December as inflation levels are more likely to decline due to a lower consumer spending.
 
That said, the US dollar prices could consolidate because of the current tightening Fed policy, albeit at a slower pace on one hand, and tensions in the energy market between the EU and Russia could lead investors to the US dollar
 
From a technical point of view, a daily close below 105.42 could send the price even lower toward 103.83. On the other side, any failure in closing below 105.42 could reverse the trading direction towards 108.11.
 
The Euro suffers consequences of the energy crisis, and the political instability in Italy, the main reason that kept the Euro above parity level with the US dollar was the more than expected rate hike delivered by the ECB (50bp).
 
The EUR/USD moves in between 1.0000 - 1.0414. A daily close below the lower end of the above-mentioned trading zone may encourage traders to focus selling pressures toward 0.9701. On the other hand, a break above the July 21 high at 1.0277 may send the price towards the higher end of the trading zone.
 
Commodities
 
Gold prices rose between yesterday and today by about 2% due to the decline in dollar prices driven by selling the US dollar after raising US interest rates.
 
Technically, on July 21 the gold price hit a multi-month low at 1681 then rallied after as some traders took profits. A daily close above 1747 could send the price even higher towards 1765, on the other hand, any failure in closing above 1747 might reverse the price to $1720/oz.
 
Oil prices rose today, due to a large decline in US inventories on the one hand, and yesterday’s drop in the US dollar value. The West Texas crude rose by 1% approaching the $100pb threshold for the first time this week, while the spread between Brent crude and WTI reached $9, due to the tight supply to Europe with the reduction of Russian oi dependence.
Technically, the daily candlestick for WTI prices kept closing below 98.65, hinting that the price might fall towards 93.57. A further close below 93.57 opens the door for the price to fall towards 89.02. On the other hand, a daily close above 100.72 could send the price even higher towards $104.50 pb.
 
 Silver Daily Price Chart (June 6 -2022 - July 28-2022)

On July 21, the silver price corrected higher to 18.24. Yesterday, prices broke the neckline of the double bottom pattern, located at 19.09 indicating the possibility of a rally towards the 20.00 handle.
 
Currently, the price moves between 18.64 -19.74  hence, a daily close above the higher end of the aforementioned zone may send the price towards 20.30. On the other hand, any failure in closing above the higher end of the mentioned trading zone may encourage traders to press towards the lower end of that zone.