Walid Salah El Din
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- The gold is still underpinned by the lower interest rate outlook which has been triggered following the release of US labor report of September which has not shown only weaker than expected non-farm payrolls and down revision of August reading but also it has shown tame monthly wage inflation pressure.
- The report has indicated that there were only 142k added jobs out of the farming sector in September, while the market was waiting for adding 200k, with down revision of August reading to be 136k from 173k in the first reading.
- While the monthly average earning per hour came unchanged and the market was waiting for rising by 0.2%, after increasing by 0.4% in August to highlight again the weak inflation pressure which is still persisting in US
- As US PCE has shown previously by rising yearly only 0.3% in June, July and August too showing no inflation pressure on the Fed to be in rush for hiking rates.
- This rate is still away from the Fed's 2% inflation target over the medium term which was the main reason why the Fed did not raise the interest rate earlier last month.
- With this tame inflation pressure, the Fed can keep waiting looking forward for watching evidence of inflation rising towards that target which has not been reached since March 2012.
- While the US labor market can be exposed to slowdown, after considerable gains in the recent years, as what has been seen in Sep US labor report which has leaded to crucial change of the interest rate outlook.
- The rising odds of keeping the interest rate unchanged for longer time in US could have also its toll on the movement of the gold which become well-supported enough above $1100 to take a higher step taking out last Sep. 24 high at $1156 by the end of last week to face now Aug. 24 resistance which has been formed at $1170.
- The commodities currencies could be well-supported versus the greenback which has been hurt by this lower interest rate outlook to suggest longer period of keeping the current accommodative stance of the Fed supporting the demand for commodities and energy.
- WTI could overtake last week last Aug. 24top at $45.32 per barrel surpassing it to reach $50.93 by the end of last week,despite being exposed to selling pressure by profit taking due to lower US production in September by 120k barrels daily and higher than expected US inventory building up in the week ending on Oct. 2 reaching 3.073m, while the modest forecast was referring to 2.2m.
- USDCAD could have a place again below1.30 psychological level, after reaching 1.3458 on last Sep. 29, AUDUSD could also gain momentum to rise above its top of last Sep. 18 at 0.7280 reaching0.7344, after forming double bottoms formation near 0.6935 above its bottom which has been formed on last Sep. 4 at 0.6908 and also NZDUSD could make progress reaching 0.6721 by the end of last week for the first time since last Jul. 29.
- The commodities currencies have not been supported by the lower interest rate outlook in US only but it has been also well-boosted from another side by the Trans-Pacific Partnership deal progress which should lead to banning of the Forex manipulations and support the growth of commodities exporting countries in a time they suffer from the lower growth outlook of China which should consider emancipation the Yuan to join TPP.
- While TPP should raise the trade between commodities exporting countries such as Canada, Australia and New Zealand to US and also Japan with no currencies manipulation.
- As this deal which can have the US Congress voting to pass next year can help US to be much more attractive for having more raw materials from these countries on the account of the Chinese proportion.
- The deal should drive the Fed to have higher appreciation of the impact of the interest rate outlook in US on the emerging markets and also it should drive it to open talking with these countries about the monetary policies as a consultant.
- Then the greenback will not be named anymore our currency and your problem, "the mantra which had been always repeated before from US"
Not Walid Salah El Din nor FX recommends accepts any liability for any loss or damage what's ever that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in these trading recommendations.
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