Article by: ETO Markets
First, the Federal Reserve cut interest rates by 50 basis points this week, taking its benchmark rate to a range of 4.75% to 5%, and expects rates to fall another half percentage point by the end of the year. The decision intensifies the market's focus on the Fed's future policy, especially in the new economic forecast, which sees rates falling to 3.4 percent by 2025, down from 4.1 percent previously forecast, and further to 2.9 percent by 2026. In addition, the point at which inflation returns to the 2% target has been pushed back to 2026, creating uncertainty in market expectations about the extent of future rate cuts.
In his post-meeting press conference, Fed Chairman Jerome Powell downplayed the risk of a recession, stressing that inflation pressures had eased and that the labor market was solid. Nonetheless, the significant rise in US Treasury yields led the dollar to rebound from its lowest point since July 2023, supporting the dollar's performance in the foreign exchange market. Judging from the reaction of the foreign exchange market, the US dollar has shown a strong recovery this week, especially in the market correction after the Fed meeting, the US dollar index (DXY) is back above 101. However, the price of gold (XAU/USD), while capped by the recovery of the US dollar, increased geopolitical risks and concerns about a global economic slowdown still supported its safe-haven demand. Overall, markets have shown a cautious appetite for risk this week, with both safe haven assets and the dollar supported.
Gold prices have approached the $2,600 mark this week on the back of a weaker dollar and expectations of a rate cut by the Federal Reserve, and are poised for further gains. The Federal Reserve slashed interest rates by 50 basis points on Wednesday and is expected to cut them again before the end of the year, a policy that has boosted demand for gold. In addition, concerns about the global economic slowdown, especially the uncertain economic outlook in the United States and China, coupled with geopolitical risks in the Middle East, further support gold as a safe-haven asset.
Despite the increased risk appetite in the market, gold prices remain supported by the dovish stance of the Federal Reserve and global political instability. Asian central banks and Russia have continued to buy gold to reduce their reliance on the dollar, which has also fueled expectations of higher prices. From a technical point of view, gold is expected to break through the key resistance level of $… and continue to climb towards the $…- $… area. A break below $…-… could lead to a pullback to the psychological level of $…, but the overall uptrend remains solid.
This week, West Texas Intermediate (WTI) prices have been driven higher by a number of factors, including the Federal Reserve's aggressive 50 basis point rate cut and the escalation of geopolitical tensions in the Middle East. The Fed's decision to cut interest rates has bolstered confidence in the US economic recovery and boosted energy demand expectations, supporting oil prices. At the same time, the escalating conflict between Lebanon and Israel has heightened fears of oil supply disruptions in the Middle East, further pushing up oil prices. However, weak economic data from China, especially slower growth in industrial production and retail sales, have clouded the outlook for global crude oil demand, limiting further gains in oil prices. Still, the significant drawdown in U.S. crude inventories has provided support for oil prices, keeping WTI strong in the near term.
From a technical point of view, WTI faces some resistance near $…. The current price is $…, just below its recent high. If oil breaks the $… mark, the next target will be resistance in the $… area.
However, if oil prices continue to move lower, the psychological $… level will be a key support level. A break below this level could further test the $… support area.
