A Dovish Signal From the Fed Was Received, and Markets React

Yesterday the Federal Reserve kept the interest rate steady at 4.5%, in line with market consensus. Later, during the FOMC press conference Fed Chair Jerome Powell gave a speech, in which a more dovish tone was perceived.

Powell warned about the disruptive effect of tariffs on the national economy and inflation, at the same time reassuring the markets that everything is under control. The labor market was described as strong, and inflation as slowly, but decisively moving towards the 2% long-term target.

However, growth concerns were also addressed, with the Fed Chair adding that nobody knows what the final effects of this trade war will be and hinted at possible future rate cuts. Traders reacted bullishly in XAUUSD, bringing the metal to a new all-time high of $3058/oz before the metal reversed later in the day.

In any case, our dovish forecast now holds strong. As we warned you, gold can experience some short-term downside momentum, led by profit-taking and the search for new bullish drivers. The targets of a small retracement ($3022, $3005, and, possibly, $2978) can be used to form a new long position for the medium term.

Meanwhile, EURUSD also grew at first, only to fall soon after Christine Lagarde (Head of the ECB) addressed economic growth concerns that might be caused by US-imposed tariffs. The pair can now fall to the 1.08000 level or even the 1.07650 level if new positive economic and geopolitical news fails to feed the market another reason to strengthen the EUR.

US equity markets (NASDAQ-100, US500) can also extend their rebound, hoping for lower rates in the future to boost economic growth. However, they are also going lower today, as the global picture has not changed at all. Still, the rebound (which we warned you about here), can bring US stock indices a bit higher, before they finally proceed bearish again on renewed tariff tensions.

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