Talking Points:
- Gold prices post largest gain in two weeks after FOMC rate decision
- Crude oil prices rise on EIA inventory drawdown, US Dollar decline
- Commodities at risk if Draghi, Carney comments stoke risk aversion
Gold prices posted the largest gain in two weeks following the FOMC monetary policy announcement. Investors seemingly opted to focus on a flattening of the projected rate-hike path despite unmistakably hawkish rhetoric from Fed Chair Yellen, who all but promised tightening in December (as expected). Crude oil prices also rose, buoyed by Fed-driven US Dollar weakness as well as a large inventory drawdown reported by the EIA.
Looking ahead, the post-FOMC swell in risk appetite continues to reverberate across financial markets, pressuring the greenback and hinting that commodities will remain well-supported over the near term. Follow-through may prove limited however as markets account for an up-shift in 2016 Fed rate hike chances. Indeed, the probability of tightening before year-end now stands at 61 percent, the highest in a month.
Brexit-linked jitters may likewise re-emerge as a source of support for the safe-haven US unit following scheduled comments from ECB President Mario Draghi and BOE Governor Mark Carney. Ifthe two central bank leaders highlight uncertainty following the UK referendum outcome as a potential source of financial instability and a cooling influence on regional economic activity, a sentiment-driven rebound in the greenback may put de-facto pressure on USD-denominated raw materials prices.
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GOLD TECHNICAL ANALYSIS – Gold prices aim to retest falling trend line resistance set from early July after breaking back above the 23.6% Fibonacci retracement at 1333.62. This barrier is now at 1347.46, with a break above that exposing a double top at 1367.15. Alternatively, a daily close back below 1333.62 opens the door for a slide back to support in the 1303.62-08.00 area (May 2 high, 38.2% level).
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices rose for a second consecutive day, securing a foothold above the $45/bbl figure. Near-term resistance is now at 46.46, the 38.2% Fibonacci expansion, with a break above that exposing the 47.18-61 area (trend line, 50% level). Alternatively, a reversal below the 23.6% Fib at 45.03 targets the 14.6% expansion at 44.15.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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