Today's Highlights
Yellin Yellen
Confused dollar
Gold's Footing
Please note: All data, figures & graphs below are valid as of March 6th. All trading carries risk. Only risk capital you're prepared to lose.
Market Overview
It's been a slow lazy start to the week. Most of the bigger events like the ECB and NFP are planned for later on this week and investors are still trying to piece together what happened on Friday.
Janet Yellen played her hand as expected and came out in favor of a rate hike in March. Expectations have indeed increased and we're now looking at a 96% chance of a rate hike in March.
Somebody forgot to tell the dollar.
Usually, when rates rise the underlying currency should do the same. However, we can see that the U.S. dollar index fell hard on Friday afternoon after Yellen and Fischer.
Golden Reaction
Though this makes less than perfect sense it does give us some insight into a separate phenomenon. What is gold reacting to, the USD or the FED?
Many analysts attributed the recent pullback in gold to the Hawkish Fed and rising rates. In fact, we can see that in the wake of the speeches from Yellen and Fischer, gold actually rose.
This is a clear indication that the pullback is not a reaction to the Fed, but rather a simple softening in relation to the U.S. dollar.
Here, let's put gold (red line) against the buck (white line) to see this more clearly. Take a look at the yellow line where we can see gold starting to come down against the stronger dollar.
In the meantime, we can see that gold is now coming on some significant support at $1220 an ounce. If it holds or breaks that level can easily determine the next direction in addition to updates about North Korea's Missile testing and any possible escalations on that front.
What else?
Please try to ignore Trump's swipes at Obama, they don't really make sense and they're intended as a distraction anyway. The more important thing are his plans on tax reform and infrastructure spending.
The Reserve Bank of Australia will publish their interest rate decision tonight. The expectation is to remain at 1.5%. A surprise is certainly not likely here but I guess that's why they call it a surprise.
Have an amazing week ahead!
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.