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Market Overview

The FOMC called for a 50 bps rate cut. This supersized cut issued a sudden burst of strength in demand for GOLD, but was quickly doused by FED Chair Powell’s remarks. 

Chair Jerome Powell said he saw no sign of a recession, citing solid growth, lower inflation and "a labor market that's still at very solid levels". He also said the Fed might have started cutting sooner, on the back of a surprisingly weak July jobs report, if it had seen that data earlier. 

Powell said the central bank is not in a rush to ease policy and that half-percentage point cuts are not the “new pace.” He also said that he does not expect the era of ultra-low interest rates to return and that the neutral rate will likely be significantly higher than the previous regime.

The large cut was to “prevent” and not a “reaction” to a slow jobs economy. 

Currently, traders price in another rate cut this November—with chances going between how large the cut would be. 

Traders are currently anticipating a 68% chance of a 25 basis-point reduction in November and a 32% chance of a 50-bp cut, according to the CME FedWatch tool. (FEDWATCH)

Further rate cut expectations will likely push the dollar lower, but may change depending on how the jobs data will appear in the coming weeks. A stronger jobs data may further strengthen the dollar as confidence in the economy grows, and in turn, possibly, delay rate cut expectations from this November to next year. 

MARKET ANALYSIS

GOLD - The GOLD has risen upon announcement of the FED rate cut. Further buying is expected after a wick has been left behind on the upside. We wait for further trading to accomplish our expectations–or break the low for a new trend.

SILVER - The SILVER has currently risen beyond previous high points. We see potential for the SILVER to go lower, but also anticipate the possibility for further buying to come in the market as further rate cut expectations take place.

DXY - After the initial upside strength of the dollar due to Chairman Powell’s remarks, we can see that the dollar has found resistance off this structure, with potential to go lower and continue the sell as further rate cuts are expected. The logic follows that, if the market is healthy and is not in any major trouble, there is no problem if we cut rates further–which they expect would come this November. We wait for further trading to show the continuation in either direction as initial strength may come into the market depending on Jobs data.

GBPUSD - The pound has dropped to under resistance level at 1.32301 with potential to drop lower. However, we wait for the clean break of the lower structure at 1.31804 before we sell this market, or a break above said structure for a buy.

AUDUSD - Risk-on assets get back its strength as the dollar shows confidence in its economy, with further rate cut expectations pushing prices down. This market is expected to break above previous high to continue buying.

NZDUSD - The Kiwi has risen above 0.62086 and is looking to buy further in the market. We anticipate further buying to occur but wait for a clean break above the structure.

EURUSD - The Euro hits a high with potential to go higher as bullish structure remains respected. However, we can also see that the euro is currently stuck in a consolidation between 1.11386 and 1.10090. A cleaner break in structure will help in market expectations.

USDJPY - Yen weakness came in after confidence in the U.S. economy grew, downsizing the yen strength. However, our expectations for the yen remain that the possibility for further selling to continue as yen strength is heightened after the 50 bps rate cut exists, as further rate cuts are expected in the market. We wait for a clearer return before selling this market. 

USDCHF - The Franc significantly moved toward the downside before the clear rejection toward the buy. However, we can see clear candle signs that the CHF may continue lower to fill up the wicks previously left behind, alongside market expectations of further selling to come into the market.

USDCAD - Despite an aggressive move up and down, we see clear consolidation in the CAD with the prices stuck between 1.36328 and 1.35762. We wait for a clearer break in market structure before a buy or a sell. However, further rate cut expectations may push prices lower, depending on BOC cut expectations.