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Talking Points:

  • Retrained FOMC[1] policy announcement buoyed commodity prices
  • Crude oil prices[2] may fall if Trump’s China tariffs sour sentiment
  • Gold prices[3] challenge range top resistance after trend line break

The US Dollar’s retreat in the wake of the FOMC policy announcement buoyed raw materials prices, which are typically denominated in terms of the benchmark currency on global markets. Officials delivered a widely expected interest rate hike but offered guidance that was a bit more cautious than markets anticipated.

Most notably, the projected number of interest rate hikes this year remained unchanged at three increases in all. Still, the outlook for 2019-20 was upgraded by a cumulative 50 basis points. The policy statement was also more obviously upbeat and the core inflation forecast was adjusted a touch higher.

Goldprices raced upward as front-end Treasury bond yields declined and the priced-in tightening path implied in Fed Funds futures flattened a bit. Not surprising, that boosted the appeal of anti-fiat and non-interest-bearing assets epitomized by the yellow metal.

Crude oilprices hit the highest level in nearly two months, adding to a five-day winning streak. Improving risk appetite amid fading fears of accelerated US tightening and EIA statistics echoing the API call for an inventory drawdown[4] amplified USD-derived strength.

Looking ahead, politics return to the forefront amid reports that US President Donald Trump is set to announce about $50 billion in tariffs aimed at China. The move is meant to punish the world’s second-largest economy for alleged intellectual-property violations.

As it stands, sentiment trends appear relatively sanguine in the face of possible trade war escalation, with S&P 500[5] futures ticking gently higher. That may quickly change if Mr Trump follows through on combative rhetoric, boosting gold as yields drop but hurting growth-geared crude oil as risk appetite evaporates.

See our free guide to learn what are the long-term forces driving crude oil prices[6]!

GOLD TECHNICAL ANALYSIS

Gold prices pushed above near-term trend line resistance to test the 23.6% Fibonacci expansion at 1333.51. Breaking above that on a daily closing basis exposes the 38.2% level at 1352.40. Alternatively, a move back below the trend line – now recast as support at 1322.49 – targets the range floor at 1307.25.

Crude Oil Prices May Retreat as Trump China Tariffs Sour Sentiment

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are poised to challengeresistance in the 66.63-67.49 area (January 25 high, 38.2% Fibonacci expansion), with a daily above that opening the door for a test of the 50% level at 70.38. Alternatively, a move back below the 23.6% Fib at 63.90 exposes the $60/bbl figure anew.

Crude Oil Prices May Retreat as Trump China Tariffs Sour Sentiment

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for

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