Traders are still digesting the news that the FOMC statement has finally removed the word called “patient”. Although, the trading action for the dollar was very much in the direction on the back of this news however, we do believe this is a great opportunity for those who have love the dollar. If you digest the full statement and clear the noise, you will see that the overall statement is bullish for the dollar and the interest rates are coming soon which we think it could be still in September provided that the economic data doesn’t fall off the cliff.
Yes, you cannot deny that the Fed have shown their cautious side during the press conference but there is nothing surprising about this because this is the role of the Federal bank and this is why it is very important for investors that they do look at it this objectively.
Given how badly the dollar has fallen and how rapidly it has recovered some of its ground, you are bound to think there was fire sale on the market which investors have taken the full leverage off. If you look at the euro dollar pair it was literally crying for this upward reaction given how bad the recent sell off was for the pair and the Fed statement has brought that price correction.
When it comes to precious metal, we have said that most of the bad news is already priced in since the Fed winded up their quantitative easing program. We do not believe that there will be any massive downside for gold for the next two years and the support of 850 is a big safety net for the metal. The upside could push the metal towards the 1600 dollar. The reason is very simple, the price action tells you every affair what the traders are thinking and how nervous they are about their positions. Because, if you look at the trading action, we have not seen much of the panic moves in gold as compared to the tapering time and the downward slide has been very gradual.