Gold Rallies After Fed Rate Cut but Struggles to Hold Record Highs

Commodity

Summary:

Gold prices edged higher to $2,580 on Thursday after falling from a record high of $2,600 following the Federal Reserve’s decision to cut interest rates by 50 bps.

BUY XAUUSD

Close Time

CLOSED

2584.99

Entry Price

2630.00

2560.00

2684.31 -21.97 -0.81%

288.6

Pips

Profit

2560.00

2613.85

Exit Price

2584.99

Entry Price

2630.00

Gold prices (XAU/USD) saw a modest recovery on Thursday, climbing back into the $2,580s after briefly dipping to the $2,540s following the U.S. Federal Reserve's much-anticipated decision to cut interest rates. This recent volatility came on the heels of gold hitting a new all-time high of $2,600 on Wednesday before quickly retreating, underscoring the complexity of the market’s reaction to the Fed’s monetary policy shift.

The central bank announced a 50 basis point (bps) cut to its benchmark federal funds rate, lowering the target range to 4.75%-5.25% from the previous 5.25%-5.50%. While such an aggressive cut might have spurred greater volatility in the past, the lack of significant price movement this time suggests that markets had already priced in the Fed’s dovish stance.

Gold’s brief surge to $2,600, a historic high, occurred right after the Fed confirmed its rate cut decision. However, this upward momentum was short-lived, as the yellow metal failed to sustain its gains. Analysts point out that the limited reaction to the Fed's rate cut was due to the fact that this easing cycle had been anticipated well in advance. The Fed’s dovishness, already baked into market expectations, limited any dramatic price shifts in gold and other assets.

Despite the initial excitement, gold's upside may have been capped by the relatively optimistic outlook on the U.S. economy provided by the Fed. Gross Domestic Product (GDP) forecasts were only marginally revised down from 2.1% to 2.0% for 2024, with the Fed projecting stable growth through 2027. This tempered outlook gave little reason for investors to pile into safe-haven assets like gold, even in the face of monetary easing.

Jim Reid, Global Head of Research at Deutsche Bank, observed that while the rate cut was substantial, the Fed signaled confidence in the overall health of the U.S. economy. "There’s no suggestion that a series of 50 bps cuts is on the horizon. Growth projections were largely unchanged, and the median FOMC member expects the fed funds rate to remain in the 4.25%-4.50% range by year-end," said Reid.

While the Fed expressed confidence in the broader economic outlook, weaknesses in the U.S. labor market are emerging as a key concern for policymakers. The central bank raised its unemployment rate forecast to 4.4% for 2024-2025, with a slight improvement to 4.2% by 2027. This revision has shifted the focus toward labor market health, as the Fed seeks to balance its dual mandate of maximizing employment and stabilizing inflation.

However, current labor market indicators haven’t yet deteriorated to the point where gold, traditionally viewed as a safe-haven asset, has seen a significant boost from fears of an economic slowdown. Jobless claims remain low, and key metrics like the quits rate and job openings (JOLTS) are still stronger than their long-term averages. The labor market’s resilience, despite growing cracks, has kept gold’s upside in check for now.

Yet, some analysts warn that labor market metrics are lagging indicators, meaning the true extent of economic weakness could emerge later. Henry Douglas, a senior economist at Global Macro Advisors, pointed out that a surprise in the upcoming payrolls report could shift market sentiment dramatically. "If we get a shocking payrolls report in November, the conversation could quickly turn toward another 50 bps cut," said Douglas.

Technical Analysis

Gold is currently rebounding after a volatile session that saw prices surge to a new high of $2,600 before falling back to the low $2,540s. As of Thursday, the precious metal has regained almost 1% and is trading in the $2,580 range.

From a technical perspective, the overall trend for gold remains bullish. The price action suggests that further upside is likely, with the potential for gold to retest the $2,600 level in the short term. The stochastic oscillator, a key technical indicator, is showing positive momentum, signaling that gold may continue to rise.

If gold can breach the $2,600 resistance, the next target would be $2,630. However, this bullish outlook will remain intact only as long as gold stays above the $2,550 support level. A break below this key support could shift the trend, opening the door for a deeper pullback. For now, the expected trading range remains between the $2,550 support and the $2,590 resistance, with a bias toward the upside.

TRADE RECOMMENDATION

BUY GOLD

ENTRY PRICE: 2585

STOP LOSS: 2560

TAKE PROFIT: 2630

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Economic

Summary:

The Australian dollar reached an eight-month high near 0.6840 against the U.S. dollar after the Federal Reserve's first rate cut in over four years.

BUY AUDUSD

Close Time

CLOSED

0.68299

Entry Price

0.69000

0.67800

0.65718 -0.01058 -1.58%

21.6

Pips

Profit

0.67800

0.68515

Exit Price

0.68299

Entry Price

0.69000

In the wake of the Federal Reserve's latest monetary policy decision, the Australian dollar (AUD) surged to a fresh eight-month high, approaching the 0.6840 mark against the U.S. dollar (USD) during Thursday’s European trading session. The increase in the AUD/USD pair highlights a notable shift in market dynamics following the Fed's announcement.

The Federal Reserve, in a highly anticipated move, reduced its key borrowing rates by 50 basis points, bringing them to a range of 4.75% to 5.00%. This marks the first rate cut by the Fed in over four years, signaling a significant policy shift. While market expectations had generally anticipated a dovish pivot, there was some uncertainty regarding the extent of the rate cut.

Historically, such dovish decisions by the Fed tend to lead to a notable influx of foreign capital into emerging markets and risk-sensitive assets, including currencies like the Australian dollar. This trend was evident as the market sentiment turned positive following the Fed's decision. The S&P 500 futures saw considerable gains during the European session, reflecting the broader risk-on mood. Concurrently, the US Dollar Index (DXY), which measures the greenback against a basket of major currencies, retreated from its weekly peak of 101.50 to around 100.60.

Market participants are now speculating that the federal funds rate could be reduced further, with projections suggesting a decline to 4.4% by the end of the year. However, the CME FedWatch tool indicates that the central bank might cut rates by as much as 75 basis points in its remaining meetings this year.

On the domestic front, Australia’s employment data for August provided additional support to the Australian dollar. The latest figures revealed that 47,500 new jobs were created, surpassing expectations of 25,000 and aligning closely with the previous report’s revised figure of 48,900 (down from an initial 58,200). The unemployment rate remained steady at 4.2%, meeting forecasts and reinforcing the strength of the labor market.

Technical Analysis

The technical outlook for the AUD/USD pair remains bullish. The price has surged past the 0.6800 level, confirming a continuation of the upward trend observed in recent sessions. This bullish momentum is supported by positive stochastic indicators, suggesting that the pair could target the next resistance level at 0.6900. The current trend is expected to remain positive unless the price falls below 0.6728 and sustains below this level, which would indicate a potential reversal.

For today’s trading, the expected range for AUD/USD is between a support level at 0.6740 and a resistance level at 0.6900. Given the prevailing trend and technical indicators, the bullish outlook appears solid for the near term.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6830

STOP LOSS: 0.67800

TAKE PROFIT: 0.6900

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound Sterling has surged past 1.3250 against the US Dollar following a significant Fed rate cut and growing speculation of further easing.

BUY GBPUSD

Close Time

CLOSED

1.32698

Entry Price

1.34000

1.31700

1.29086 -0.00760 -0.59%

84.4

Pips

Profit

1.31700

1.33542

Exit Price

1.32698

Entry Price

1.34000

The Pound Sterling has surged above 1.3250 against the US Dollar, driven by the Federal Reserve’s recent substantial rate cut and growing expectations for further policy easing. The US Dollar, weakened by this development, saw its index (DXY) retreat from a five-day peak of 101.50, reflecting investor reactions to the Fed's latest moves and future outlook.

The Federal Reserve's decision to cut interest rates by 50 basis points on Wednesday has marked a significant shift in monetary policy, highlighting the central bank’s confidence in the easing of inflationary pressures and its increasing concern over the deteriorating conditions in the labor market. Fed Chair Jerome Powell, however, dismissed recession fears, stating, "I don't see anything in the economy right now that suggests that the likelihood of a recession," while noting solid growth, decreasing inflation, and a robust labor market.

Looking ahead, Fed officials project the federal funds rate to end the year at 4.4%, implying the possibility of an additional 50 basis points cut. According to the CME FedWatch tool, there is a 65.6% probability that the Fed will lower rates by 25 basis points to a range of 4.50%-4.75% in November, with the remainder of the market expecting a 50 basis points cut.

Citi analysts anticipate that the Fed will opt for a 50 basis points cut in November, reflecting Powell's commitment to avoiding being caught behind the curve. They note that the potential for further significant rate reductions remains high, especially given the risks of a more pronounced softening in labor market data.

In the US session on Thursday, attention will shift to Initial Jobless Claims data for the week ending September 13. Expectations are for claims to hold steady at 230,000, a key indicator of labor market health.

Technical Analysis

The GBP/USD has recently advanced, reaching the 1.3265 level, and appears poised to extend its bullish trend. A breach of this level could confirm a continued upward trajectory, with the next target set at 1.3400. The 50-day Exponential Moving Average (EMA50) continues to support this bullish movement, reinforcing the current trend.

However, the bullish outlook remains contingent on the price not falling below the 1.3124 level. A daily close below this support could invalidate the current bullish sentiment. For today, the expected trading range is between a support level of 1.3120 and a resistance level of 1.3280. The overall trend forecast remains bullish as long as these key levels hold.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3270

STOP LOSS: 1.3170

TAKE PROFIT: 1.3400

Risk Warnings and Disclaimers

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Winkelmann

Commodity

Summary:

Gold surged after the Fed announced a rate cut, but it fell back quickly. As the bullish factors still exist, gold will remain in an uptrend in the medium and long term.

BUY XAUUSD

EXP

EXPIRED

2535.00

Entry Price

2600.00

2495.00

2684.31 -21.97 -0.81%

Pips

EXPIRED

2495.00

2655.84

Exit Price

2535.00

Entry Price

2600.00

Fundamentals

On Wednesday, the anticipated Fed rate decision was announced. Unexpectedly, the Fed cut interest rates by 50 basis points, higher than the market expectation of 25 basis points. The financial markets were almost all boosted, with gold hitting an all-time high approaching $2600. However, the dollar rallied and gold prices fell by almost $50 after Fed Chairman Powell's hawkish and reassuring speech. The 50-bps rate cut was not at a regular pace, which sparked concerns about a weakening economy. Powell also indicated that balance sheet shrinkage and rate cuts were taking place simultaneously. As expected, partial gold bulls took profits.

In the near term, gold will see some correction due to the pattern of 'Buy the Rumor, Sell the News'. Nevertheless, given that the Fed has entered an easing cycle, global geopolitical tensions remain, central banks tend to buy gold in the long run, and the U.S. election outcome is uncertain, all of these support the gold price which is still on track to hit another record high.

Technical Analysis

Try to Buy Low in a Strong Gold Bull Market _1

In the 4H chart, XAUUSD turned downward and dropped to $2570 after hitting a historical high near $2600, leaving a long upper shadow. Despite some rebounds, XAUUSD failed to break above $2570 and remains bearish below this level. However, XAUUSD remains bullish with an intact uptrend. Gold's performance tends to shine in rate-cut cycles and any decline is likely to provide opportunities for buying low. Investors should therefore keep an eye on the support levels of $2530 and $2500.

It is recommended investors buy when XAUUSD retraces to $2530. The target price should be at $2600, and the stop-loss should be below $2500.

Trading Recommendations

Trading direction: Buy

Entry price: 2535

Target price: 2600

Stop loss: 2495

Support: 2550/2530

Resistance: 2600/2570

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

After reaching a peak of 0.8624 on August 7, the price has since dropped to 0.8410. If the pair breaks below this support and makes new lows, the pound could gain momentum.

SELL EURGBP

EXP

EXPIRED

0.84320

Entry Price

0.83150

0.84700

0.82901 -0.00261 -0.31%

Pips

EXPIRED

0.83150

0.83494

Exit Price

0.84320

Entry Price

0.84700

Fundamentals

Last week, the European Central Bank (ECB) reduced interest rates by 0.25 percentage points to 3.5%, responding to easing inflation in the Eurozone and signs that the region’s economy may be stagnating.

ECB President Christine Lagarde announced that the decision to lower the deposit rate for the second time this year was unanimous, contrasting with the June cut, where Austrian central bank chief Robert Holzmann had dissented.

“The Governing Council has decided to reduce the deposit facility rate by 25 basis points, the key instrument for guiding monetary policy. Based on an updated assessment of inflation expectations, underlying inflation dynamics, and the effectiveness of monetary policy transmission, we now consider it appropriate to further moderate the degree of monetary tightening,” the ECB stated in a press release.

ECB Governing Council member Gediminas Šimkus commented on Tuesday that "the likelihood of an October rate cut is very small." Meanwhile, ECB Chief Economist Philip Lane noted on Monday that the ECB should maintain flexibility regarding the pace of policy adjustments, adding that wages are rising "as expected" and will likely remain "elevated and volatile" through the second half of 2024. This suggests inflation could remain relatively high, with Lane advocating a cautious approach to further rate cuts.

On the other hand, the Bank of England (BoE) is expected to hold interest rates steady at 5.0% on Thursday. However, cooling wage growth in the UK could prompt the BoE to deliver at least one more rate cut before the year ends, the tone of the August meeting and subsequent speeches have made it clear that officials don’t want markets to assume this will be a rapid easing cycle.

On Wednesday, the UK Consumer Price Index (CPI) inflation data will be released. The CPI is expected to show a 2.2% year-on-year increase for August, while core inflation is projected to rise by 3.5% during the same period. A softer reading could lead the BoE to consider another rate cut in November.

Also the Federal Reserve has implemented its first rate cut in four years, and it has done so aggressively. Under the leadership of Jerome Powell, the institution opted for a 'jumbo' reduction of 50 basis points, bringing rates down to 4.75%-5%, in line with traders' expectations, who had assigned a 64% probability to this cut.

Additionally, the 'dot plot,' which reflects the Fed officials' projections for the coming months, signals two more rate cuts this year, forecasting two further rate-cutting meetings by December. This adds pressure on other central banks to follow the Fed’s lead in its easing cycle, incluiding ECB and BOE. Interest Rate Disparities Could Trigger a Bearish Breakout in EUR/GBP_1

Interest Rate Disparities Could Trigger a Bearish Breakout in EUR/GBP_1

Technical Analysis

The EUR/GBP pair is currently trading around a key level near 0.8400, with the price holding below both the 100-period and 200-period moving averages and once again testing recent lows. A downside breakout seems increasingly likely, with potential targets around 0.8300.

After reaching a peak of 0.8624 on August 7, the price has since dropped to 0.8410. If the pair breaks below this support and makes new lows, the pound could gain momentum. Conversely, if buyers defend this zone and the BoE adopts a more dovish stance, it could signal a short-term bullish reversal.

Trading Recommendations

Trading direction: Short

Entry price: 0.8432

Target price: 0.8315

Stop loss: 0.8470

Validity: Sep 27, 2024 15:00:00

Support: 0.8401, 0.8394, 0.8383

Resistance: 0.8432, 0.8460, 0.8478

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

For next year, the Fed estimates rates will drop to 3.4%, compared to June’s 4.1% forecast, and fall further to 2.9% in 2026 and beyond.

BUY GBPUSD

Close Time

CLOSED

1.32110

Entry Price

1.34000

1.31100

1.29086 -0.00760 -0.59%

128.1

Pips

Profit

1.31100

1.33391

Exit Price

1.32110

Entry Price

1.34000

Fundamentals

The Federal Reserve (Fed) announced on Wednesday a 50 bps interest rate cut in the United States, marking the first reduction after a cycle of eleven hikes that began in March 2022.

At this time, the regulator has gained "greater confidence that inflation is moving sustainably towards 2%," and considers that the risks to achieving its employment and inflation goals "are roughly balanced," though "the economic outlook remains uncertain."

The Federal Reserve might have cut interest rates sooner, at the end of July, had it seen the month’s employment report, which was published days later and showed a weakening U.S. labor market, Fed Chairman Jerome Powell said on Wednesday.

Michelle Bowman cast the first dissenting vote from a Fed governor since 2005, favoring a smaller rate cut at Wednesday’s monetary policy meeting.

The governor has remained cautious about disinflation, stating in an August 20 speech that price growth remained "uncomfortably" above the Fed’s 2% target, advocating for a more "gradual" reduction in the federal funds rate.

At this meeting, the U.S. central bank also released its macroeconomic projections. It now expects rates to close the year at an average of 4.4%, down from the 5.1% forecast in June. For next year, the Fed estimates rates will drop to 3.4%, compared to June’s 4.1% forecast, and fall further to 2.9% in 2026 and beyond.

The Fed has revised down its expected PCE inflation for this year to 2.3%, three-tenths lower than its June forecast. As for core inflation, it now expects it to end the year at 2.6%, down from the previously anticipated 2.8%.

Additionally, the Fed’s projections point to lower growth and higher unemployment in 2024 than previously thought. It now forecasts an unemployment rate of 4.4% by year-end, up from the 4% expected in June. Regarding the economy, the Fed predicts GDP growth of 2%, down by one-tenth from its previous projection.

Meanwhile, in the UK, inflation stood at 2.2% year-over-year in August, unchanged from July and slightly above the Bank of England's 2% target, according to data from the Office for National Statistics (ONS) released Wednesday.

The Bank of England will decide on Thursday whether to cut rates again, following its August reduction, the first since 2020, which left its main rate at 5%, down by a quarter-point. The central bank is expected to keep its key rate steady. Post 50 Point Cut Buying Signals Strengthen Amid Bullish Breakout_1

Post 50 Point Cut Buying Signals Strengthen Amid Bullish Breakout_1

Technical Analysis

On Wednesday, during the volatility surrounding the Fed announcement, GBP/USD briefly reached 1.3296 before retreating to 1.3177 following Jerome Powell's press conference. The 100- and 200-period moving averages on the 4-hour chart are near two resistance zones at 1.3142 and 1.3031, respectively. Market volatility during announcements like these is typically high, so it is advisable to wait for the market’s reaction after the news before taking a position.

Although the cut was larger than expected, signaling bearish pressure on the dollar, a pullback is possible before the trend resumes. The 1.3150 area could be revisited before the pair regains upward momentum, with potential targets up to 1.3400, while a break below 1.3000 could signal further significant declines, if the breakout holds above 1.3200, the uptrend could continue.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3200

Target price: 1.3400

Stop loss: 1.3110

Validity: Sep 27 2024 15:00:00

Support: 1.3146, 1.3088, 1.3001

Resistance: 1.3238, 1.3267, 1.3296

Risk Warnings and Disclaimers

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Eva Chen

Stocks

Central Bank

Summary:

NASDAQ 100 consolidated horizontally ahead of the Fed's interest rate decision. Now, this index is fighting with the descending trendline, showing an unclear ascending path.

BUY IXIC

EXP

EXPIRED

17900.00

Entry Price

18900.00

17164.00

19286.77 +17.31 +0.09%

Pips

EXPIRED

17164.00

17934.92

Exit Price

17900.00

Entry Price

18900.00

Fundamentals

The NASDAQ 100 moved horizontally today and extended the low-volatility trend. The market preferred wait-and-see ahead of the Fed's interest rate decision.

The first interest rate cut by the Fed since March 2020 is anticipated later today, with speculations revolving around reductions between 25 to 50 basis points—this could exert influence over stock markets.

Notably, the formation of lower highs (transitioning from demand zones to supply zones) suggests the persistence of bearish sentiment in the index.

Yet, observing the rotation across major American indices, both the S&P 500 and Dow Jones Industrial Average have reached record highs. Could this foreshadow an upward push for the NASDAQ-100 index in subsequent trading sessions? Upon such ascent, completing the test from demand to supply zones could catalyze breakout trades.

We recommend investors enter trades after breakouts above critical supply levels at 17,790 and 18,015.

Be Cautious of Traps, Trade after Breakthrough _1

Technical Analysis

Momentum indicators reveal no clear bullish direction. Specifically, the Average Directional Index (ADX) demonstrates horizontal movement, indicating weak bullish trends. Similarly, the Relative Strength Index (RSI) hovers near its midpoint, confirming the market's current low-volatility environment. Of greater significance, the stochastic oscillator is marginally climbing above its moving average line. Acceleration into the overbought territory could signal strong bullishness. However, this indication is obscure.

Should the market surge today, surpassing pivotal supply areas at 17,790 and 18,015, it may align with movements observed in the S&P 500 and Dow Jones. Such a rally could be akin to an AB=CD pattern, targeting an all-time high of 18,678.

In the event bears regain control, they may encounter robust support along the trendline established on July 11, 2024, coupled with the range of 17,481 to 17,335, fortified by the 50-day and 100-day SMAs. Succeding in breaking below this level could initiate a decline toward the 16,670 level.

Overall, investors are awaiting the outcome of the Fed's meeting, which has the potential to amplify volatility. Trading after a breakthrough appears to be the most viable strategy.

Trading Recommendations

Trading direction: Buy

Entry price: 17900/18050

Target price: 18900

Stop loss: 17164

Valid until: Oct 03, 2024 23:55:00

Support: 17487/17342/17012

Resistance: 17790/18015/18127

Risk Warnings and Disclaimers

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Gold Rallies After Fed Rate Cut but Struggles to Hold Record Highs

Australian Dollar Climbs to Near Eight-Month High Post-Fed Rate Cut

Pound Sterling Surges Above 1.3250 as Fed Rate Cuts Spark Market Shifts

Try to Buy Low in a Strong Gold Bull Market

Fundamentals

Technical Analysis

Trading Recommendations

Interest Rate Disparities Could Trigger a Bearish Breakout in EUR/GBP

Fundamentals

Technical Analysis

Post 50 Point Cut Buying Signals Strengthen Amid Bullish Breakout

Fundamentals

Technical Analysis

Be Cautious of Traps, Trade after Breakthrough

Fundamentals

Technical Analysis

Trading Recommendations

Risk Disclosure