Halting interest rate hikes this year by the Fed is bullish for gold. Will the gold price continue rising?
The Federal Reserve’s dovish stance hurt the US dollar, making gold more affordable and attractive for investors. At the conclusion of the March meeting yesterday the Fed cut the projection of the number of interest-rate hikes expected this year to zero from the two forecast in December. This is clearly dovish for the dollar. At the same time policymakers indicated in Fed’s statement that continued US economic growth remains “the most likely” scenario for the US, supporting demand for risky assets - stocks. Continued strength in US stock prices is the major risk for gold. Thus, positive recent data attest to continued strength of US economy while reports US Trade Representative Lighthizer and Secretary of Treasury Mnuchin will visit Beijing next week indicate US and China are in the final stages of trade negotiations.
Durable goods orders increase together with construction spending in January, which were above forecast. The consumer price index rose 0.2% on month in February after three months of no change. Retail sales rose above expected 0.2% over month January, after downwardly revised 1.6% drop in December. And factory orders growth was steady in January. The Federal Reserve decision indicating dovish turn in central bank monetary policy is bullish for gold prices.
On the daily timeframe the XAUR/USD: D1 has been retracing higher after hitting seven-week low in the begging of March.
The Parabolic indicator gives a buy signal.
The Donchian channel indicates uptrend: it is widening up.
The MACD indicator gives a bullish signal: it is above the signal line and the gap is widening.
The RSI oscillator is rising but has not breached into overbought zone yet.
We believe the bullish momentum will continue after the price breaches above the upper boundary of Donchian channel at 1319.18. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below the lower Donchian boundary at 1280.73. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (1280.73) without reaching the order (1319.18), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.
Technical Analysis Summary
| Buy |
| Above 1319.18 |
| Below 1280.73 |
Market Overview
- Fed cuts rate hikes projections to zero
- Stocks fall and dollar weakens after dovish Fed
US stock market continued retreating on Wednesday led by bank shares after dovish Fed decision. The S&P 500 slid 0.3% to 2824.23. The Dow Jones Industrial Average fell 0.6% to 25745.67. NASDAQ Composite index however added 0.1% to 7728.97. The dollar weakening accelerated as Federal Reserve cut the projection of the number of interest rate hikes expected this year to zero from the two forecasts in December. The live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.6% to 95.94 and is lower currently. Futures on US stock indexes point to lower openings today.
DAX 30 Leads European Losses
European stocks turned lower on Wednesday with all sectors down. The EUR/USD accelerated its climb while the GBP/USD turned lower as the UK officially requested a delay to its departure from the EU. Both pairs are currently higher. The Stoxx Europe 600 fell 0.9% led by auto makers shares. Germany’s DAX 30 dropped 1.6% to 11603.89, France’s CAC 40 lost 0.8% and UK’s FTSE 100 slid 0.5% to 7291.01.
Shanghai Composite Leads Asian indices Higher
Asian stock indices are mostly higher today after dovish Fed decision. Nikkei added 0.2% to 21608.92 despite yen’s continued climb against the dollar. China’s stocks are mixed: the Shanghai Composite Index is up 0.4% while Hong Kong’s Hang Seng Index is 0.7% lower. Australia’s All Ordinaries Index inched up 0.03% despite the Australian dollar's continued gain against the greenback.
Brent Rise Boosted By More US Inventory Drop
Brent futures prices are extending gains today. Prices rose yesterday after data showed US crude stockpiles fell by 9.6 million barrels last week with gasoline supplies dropping further. May Brent crude rose 1.3% to $68.50 a barrel on Wednesday.