U.S. Fed Chair Powell’s Testimony
The key event for the day will be U.S. Fed Chair Powell’s Testimony which lasts for 2 days. The release time of the event will be 1500 GMT/2030 IST. The testimony usually comes in 2 parts: first the Fed Chair reads a prepared statement (a text version is made available on the Fed’s website at the start), then the committee will hold a question and answer session. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility. As head of the central bank, which controls short term interest rates, he has more influence over the nation’s currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy.
The Key Points To Keep In Mind Regarding Powell’s Testimony:
- On the first day of the Testimony, Powell will face Senate Banking Committee and the next day is scheduled to attend the House of Financial Services.
- This will be the First Testimony after Biden took control of the Senate and White House as a President
- The most likely core topic will be Biden’s plan for $1.9T as additional pandemic aid
- Fed will try to put emphasis on relief package and shows his commitment to support the U.S. economy
- In addition, ongoing vaccination program is the key reason for the U.S. economy recovery for the H2.
- The U.S. has already started vaccine program. Till today around 1.7 million coronavirus vaccine shots are being administered every day and with 13% of the population receiving a first dose too.
- New York is facing supply issue and Texas is facing cold weather issue.
- U.S. yield curve is also steepening and ten year rates also rose from 0.91% to 1.39%. The rising treasury yield tightens fiscal conditions by driving up mortgage and credit card rates.
- Powell put emphasis for keeping interest rates near zero level until the economy reaches maximum employment and inflation hits 2 percent.
With all of this keeping in mind, Powell likely to replicate that accommodative monetary policy will keep in place for the time being.
Let’s see how Gold has reacted during the previous data release:
XAU/USD (Gold): Gold moves in stiff boundaries ahead of key event for the day. The pair made intraday high at $1,816 and low at $1,803 mark. The triple EMA on a Day chart still showing some downside pressure but in short run, H1 chart confirms bullish trend. A sustained close above $1,822 requires for the upside rally. Alternatively, a consistent close below $1,798 will check further supports.
Key Resistances: $1,822, $1,827, $1,832, $1,840
Key Supports: $1,802, $1,794, $1,787, $1,778
Take a look and do trade wisely!