Fed Chair Powell’s hawkish comments drive the market
Gold => The commodity falls towards $1720
BTC/USD => The cryptocurrency trades below $20k
AUD/USD => The pair falls below 0.6850
Gold hits a monthly low
Gold tumbled on Friday following Federal Reserve Chair Jerome Powell’s speech where he surprised the markets with his hawkish tone.
Personal consumption expenditure, the Fed’s preferred inflation gauge fell by more than expected in July but that was quickly overshadowed by Fed Powell’s speech. Powell warned that interest rates would likely remain high for longer as the Fed attempted to stamp out inflation. As a result of high-interest rates, economic growth is expected to slow, as well as the US jobs market, which has been strong so far despite high inflation.
The prospect of high-interest rates for a longer period has boosted the USD to a 20-year high and is bad news for dollar-denominated, non-yielding gold. Attention will now turn to Fed vice president Brainard who is due to speak. Later in the week, the key data event is the non-farm payroll report.
| US Core PCE | Expected: 4.6% (0.2%) | Previous: 4.8% |
Where next for Gold?
After hitting resistance at $1808 on August 10, Gold has rebounded lower, falling back into the multi-month falling channel.
The 100 sma has crossed below the 200 sma in a bearish signal, and the RSI is in bearish territory, suggesting more downside. Sellers are looking towards 1700, the round number, and then 1680, the 2022 low, to extend the bearish trend. On the upside, buyers will look for a move over 1765 to bring 1805 back into play and create a higher high.
BTC/USD tracks risk assets lower
BTC/USD has fallen some 20% since $25, 200k in mid-August, hurt by hawkish Federal Reserve bets.
Today the cryptocurrency trades below the key psychological level of $20k after tracking equities and risk assets lower. The Nasdaq fell 4% on Friday as the market continues to mull over Powell’s commitment to stamp out inflation.
BTC/USD trades were down 2% over the past 24 hours. Separately in recent crypto news, Japan is set to review existing corporate crypto tax rates to encourage start-ups to remain in the country. The Japanese financial services and ministry of finance could exempt start up’s that issue tokens from paying taxes on unrealised gains.
AUD/USD drops despite upbeat retail sales
AUD/USD rose 0.25% last week as the Aussie dollar showed resilience against a surging USD, thanks partly to Beijing announcing a massive stimulus program totaling around 1% of GDP, helping the China proxy.
Still, concerns are growing over the health of the Chinese economy, with some analysts now predicting just 3.5% growth YoY, down from 3.9%. Overnight Australian retail sales came in well ahead of forecasts, suggesting demand is recovering despite high inflation.
However, today the pair is falling on USD strength following Jerome Powell’s speech, and as attention turns to Fed Brainard and Australian building permits, A hawkish-sounding Brainard could lift the USD further.
| Aus. Retail sales MoM | Actual: 1.3% (1.1%) | Previous: 0.2% |
Support can be found at 0.68 (round number) and 0.6720 (low 15 July).
Resistance for the pair can be seen at 0.6920 (50 sma) and 0.70 (psychological level).
