A1 Trading Company

March 21, 2024

Gold & Indices Rocket After Dovish Fed

Frank Cabibi

The FOMC meeting yesterday left traders feeling like the Fed is still not concerned about the recent rise in inflation. Here are some reasons why gold and the indices can continue to find upside in the meantime as we break down the dovish fed statement.

EdgeFinder Analysis

The US30 is a strong buy on the EdgeFinder now after yesterday's dovish Fed comments. At +7, the index is our strongest bullish score of the big three in the US. Blue chips are happy with yesterday's news since Powell remained optimistic on economic growth while not being worried about inflation.

This suggests that the central bank will not take any action to fight inflation other than keeping rates where they are. Another notable thing Powell mentioned yesterday was that rate cuts are still on the table this year, and we are still likely to expect what they have already forecasted.

Gold flew higher to unexplored territory this morning but only to pull back near the open. Metals and indices have been overextended for some time now, but it still might not be the end of the rally. Investors were concerned of a more hawkish Fed statement yesterday which didn't arrive.

If price can stay above support at $2,148, it may continue to move back towards today's highs at $2,222. The 2 year yield is up today, however, which could be driving the metals back lower.

GU's score flip could spell bearishness on the pair. After what seemed like a dovish hearing from the Fed yesterday, the score sunk lower to -5 today. Retail is now majority long which is unusual to see. The talks of rate cuts could still fuel a rally against the dollar.

If the dollar flips to a weak sentiment as a result of rate cut expectations remaining unchanged, we could be looking at bullish GU, commodities and indices (and bitcoin).

Retail Spotlight

It now appears that retail traders are bullish on crypto, metals and currencies against the dollar. Oil remains mixed, gold mixed. There is significant short interest in the retail crowd on the US and foreign indices.

Smart Money Spotlight

GU shows increasing retail sentiment along with declining COT support. The recent downside this week could be a sign that price shifted to the downside already.

Fundamental Spotlight

A -2 score on USDJPY's interest rate category is due to the BOJ expecting higher rates over the next few quarters while the Fed remained steadfast in their rate cut projections this year.

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