U.S. FOMC Federal Funds Rate Decision
The wait is over as FOMC will declare Monetary Policy Statement and Funds Rate decision at 1800 GMT/2330 IST followed by FOMC Press Conference. It’s the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.
No changes are expected in funds rate this time but the question is, will Fed stick to the same statement and reiterate that Fed is waiting for “substantial further progress” in the economy or come to conclusion regarding timing of the economy recovery?
From the latest Economic Indicators one can see the strength of the U.S. economy as Consumer Confidence is strong, House Prices are rising, retail Sales are up, ISM services sector activity grew at their fastest pace ever and ISM manufacturing index strengthens to its highest level too. The appreciable part is that half of the Americans have taken at least the first doze of the vaccine.
Despite this entire positive scenario, if no changes are made to the Fed’s tone, the greenback will continue to depreciate. On the other side, a small hint regarding expected inflation and any major changes in the Fed’s balance sheet will make the U.S. dollar stronger.
Let’s see the past movement of Gold during the FOMC Meet:
XAU/USD (GOLD): Gold spiked up noticeably after U.S. released Goods Trade balance data with negative numbers and gave volatility from $1,762 to $1,774 mark in just one hour only. The pair made intraday high at $1,777 and low at $1,762 mark. A day as well as H1 chart suggests bearish trend for the time being. A sustained close above $1,784 requires for the upside rally. Alternatively, a consistent close below $1,762 will check further supports.
Key Resistances: $1,778, $1,784, $1,788, $1,792, $1,797, $1,805
Key Supports: $1,758, $1,754, $1,748, $1,742, $1,737, $1,732
Note: Important to make a note here that U.S. President Biden is due to speak tomorrow at 0100 GMT/0630 IST on proposed spending plan, investments and taxes before Congress, in Washington DC. It may create volatility in the Forex market.
Take a look and do trade wisely!