Fed’s hawkishness supports USD, weighs on Gold

Increased hawkishness by Fed’s Warsh

Fed Chair Warsh, in his Jackson Hole speech, renewed the bank’s hawkishness, as he warned that inflation is too high with no signs of easing. The bank’s focus at the current stage seems to be primarily on inflation and the speech tended to increase market expectations for a rate hike at the bank’s September meeting. The speech tended to provide some support for the USD in the FX market while at the same time weighed on gold’s price, displaying the negative correlation of the two trading instruments.

Oil prices jump on renewed tensions

The oil market seems to continue to be concerned about the situation in the Middle East. In the latest turn of events, the US has struck Larak island, an Iranian island strategically placed at the Straits of Hormuz, while US President Trump posted an AI video of Iran’s main oil base, Kharg island, in ‘smithereens’. Iran responded with a missile attack on US airbases in Jordan. The renewed tensions caused oil prices to rise, and we expect further bullish tendencies should tensions escalate further. 

Other highlights for today

Today we get Turkey’s GDP rates for Q2, Germany’s preliminary HICP rates for August and the US Dallas Fed Manufacturing business index also for August. In tomorrow’s Asian session, we get Australia’s building approvals for July and China’s Rating Dog manufacturing PMI figure for August. 

As for the rest of the week

On Tuesday we get UK’s nationwide house prices for August, Euro Zone’s preliminary HICP rate for August, Canada’s manufacturing PMI figure for August, the US ISM manufacturing PMI figure for August, and the US JOLTS job openings figure for July. On Wednesday we get Australia’s  GDP rate for Q2, New Zealand’s RBNZ interest rate decision, the US ADP national employment figure for August, the US Factory orders for July and Canada’s BoC interest rate decision. On Thursday we get Australia’s trade data for July, China’s rating dog services PMI figure for August, the Swiss and Turkish CPI rates for August, the Swiss GDP rate for Q2, the US weekly initial jobless claims figure, Canada’s trade data for July and the US ISM non-manufacturing PMI figure for August. On Friday we get the Canadian and US employment data for August.  

Charts to keep an eye out

Gold’s price tumbled on Friday breaking the 4550 (R1) support line, now turned to resistance. As the precious metal’s price action has broken also the upward trendline guiding it, we switch our bullish outlook in favour a sideways motion for the time being. The RSI indicator has also corrected lower, reaching as low as the reading of 50, implying an evaporation of the bullish market sentiment and a prevailing neutral stance of the market for gold’s price. Should the bulls regain control over the precious metal’s price direction, we may see it reversing Friday’s losses, breaking the 4550 (R1) resistance line and start aiming for the 4890 (R2) resistance level. Should the bears take over, we may see gold’s price breaking the 4275 (S1) support line and start aiming for the 3960 (S2) support level. 

WTI’s price edged higher in todays’ Asian session yet remained well between the 88.60 (R1) resistance line and the 82.00 (S1) support level. The RSI indicator edged a bit higher than the reading of 50, yet nothing convincing for the commodity’s bullish tendencies. Overall, we maintain a bias for a sideways motion of WTI’s price at the current stage yet warn for any possible bullish tendencies of the commodity’s price action. Should the bulls be in the driver’s seat, we may see WTI breaking the 88.60 (R1) resistance line and start aiming for the 93.30 (R2) resistance level. Should the bears be in charge, WTI’s may break the 82.00 (S1) support line and start aiming for the 76.60 (S2) support level.  

XAU/USD daily chart

• Support: 4275 (S1), 3960 (S2), 3600 (S3).
• Resistance: 4550 (R1), 4890 (R2), 5245 (R3). 

WTI daily chart

• Support: 82.00 (S1), 76.60 (S2), 71.85 (S3).
• Resistance: 88.60 (R1), 93.30 (R2), 98.50 (R3).