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Gold Consolidating Ahead of the FOMC Meeting.

The question for tomorrow is essentially whether the Fed will raise rates earlier than mid-2015. There seems to be a lean toward a shift earlier rather than later because of strong Q2 data. However, Q3 data has not impressed. 

We can see the market becoming tentative regarding the greenback ahead of tomorrow's FOMC decision and press conference. 

When we look at gold and silver, we also see markets that look are consolidating in the middle of a strong USD-strong and commodity-weak market. What will the reaction after the FOMC event risk tell us?

Gold found support at 1225.64, and resistance at 1242 this week. The 4H chart also shows a consolidation in the form of a possible flag pattern against a bearish market that is still intact as evidenced by the moving averages and the RSI.

(Gold 4H Chart 9/17)

1) If FOMC is hawkish, the expectation will be USD-strength. In this environment, if gold falls back below the flag pattern, we should at least expect a test of the 1225.64 level. Now, if price does break below 1225, we can expect some further downside toward the 1180-1185 area, which contain the 2013 and 2014 lows. However, if a hawkish FOMC is followed by a failure to break below 1225, gold might be developing a medium-term consolidation/correction.

2) If the FOMC is dovish, then we should expect medium-term consolidation/correction. However, in the short-term the 1250 area might come in play, along with the falling trendline from a resistance pivot at about 1296.50. A break above this trendline and 1250 will be needed to introduce the medium-term consolidation scenario, especially if the 4H RSI also pushes above 60. In this bullish correction scenario, the 1275, then the 1295-1300 levels are the bullish targets.