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EUR/USD and Gold Prices Hinge on Fed Meeting

EUR/USD and Gold Prices Hinge on Fed Meeting

Markets steadies in anticipation of the US Fed meeting on Wednesday.

The Japanese’s trade balance numbers of ¥248.3B released earlier for August came in higher than expected of -¥37.5B, and better than the prior read of ¥10.9B. Nevertheless, this data did have any noticeable effect on the Japanese yen against major currencies.

Equities

Global stock markets closed higher on Tuesday thanks to positive Chinese data. However, Asian markets on Wednesday looked more cautious anticipating the Fed meeting on Wednesday.

Investors are taking into account market risks such as the US elections, a potential no-deal Brexit, and the delay of the Coronavirus vaccine, even though the president Trump said that the jab may be ready within few weeks.

Stock Market

Change %

S&P 500

+0.5 %

Dow Jones

-0.01%

NASDQ

+1.2%

Japan 225

-0.08%

DAX 30

-0.1%

FTSI 100

+0.8%

CAC 40

+0.2%

Currencies

The US Dollar index remained flat as investors wait for the Fed meeting on Wednesday. No change in the current monetary policy is expected, yet the market’s observers would be following the central bank’s growth and inflation projections, and of course the unemployment rates. Additionally, they will pay attention to the Fed dot plot diagram and whether the Fed members’ have changed expectations for the US interest rates in the coming years.

EUR/USD saw little change keeping and remained in the current trading zone 1.1713 – 1.1909. The technical outlook remains neutral while the pair continues below 1.1909.

GBP/USD steadied this week after losing over 3% of its value last week due to Johnson’s controversial internal market bill that breaches in part of it the UK commitments in the EU/UK exit treaty. With that said, we still think that both would agree eventually, due to the expensive bill they must pay in the hard Brexit scenario. From a technical point of view, a close below 1.2773 would change Cable’s technical outlook to negative.

Commodities

The oil price has traded higher for the second day due to a disruption in the US oil supply caused by hurricane Sally. The US Crude rose by 3.2% and Brent oil rallied by 2.5% on Tuesday, both markets extended their gains on Wednesday due to reports that the outage may continue for several days.

Gold rallied to a near two-week high on Tuesday then pulled back as investors preferred to wait for the Fed meeting before pushing the yellow metal in a clear direction. From a technical point of view, Gold’s outlook remains neutral while moving in the current trading zone $1,921 - $2,015.

Looking Ahead

On Wednesday, investors will know about the Eurozone balance of trade for July at 1:00 PM (UAE time), the Canadian inflation rate with the US retails sales for August come at 4:30 PM, and at 10:00 PM all eyes will be on the Fed rate decision and economic projections than the Fed chair press conference at 10:30 PM.

The Fed Dot Plot Diagram June 10-2020


Diagram source: The Federal Reserve Projection Materials

This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk. The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.