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Market Watch review. 16.09.2020

In today's release, we’ll cover the following topics:

  • Phase of uncertainty.
  • US Federal Reserve Monetary Policy Report.
  • Rising oil prices.

I will start today's review with a rather interesting situation and not quite typical for September. If you look at the given price chart of the EUR / USD currency pair, you will see a rather long consolidation of quotes in the sideways. Please note that the difference between the lows from the beginning of July and the beginning of September is only 50 points, the same situation is with the highs. All this indicates that large market participants are waiting for something very important.

It is also noteworthy that we are witnessing the so-called phase of uncertainty not only in the foreign exchange market, but also in the precious metals market. And again I suggest looking at the price chart, but now for gold. After a fairly strong wave of decline in early August, trading activity has noticeably decreased and, as a result, we observe the formation of a symmetrical triangle graphic figure - this is a figure of uncertainty.

Of course, the main event of the next few months may be the US presidential elections, and this fundamental factor partially explains the current behavior of traders and investors. But I will also draw your attention to an event that can have a strong impact today on both the US dollar and gold - this is the decision of the Fed on the main interest rate, as well as other conditions of monetary policy.

Let me remind you that this is the last such FOMC meeting before the presidential elections in November. Nevertheless, the probability of a change in the main interest rate is very low, so all the attention of traders and investors will be focused on the new inflationary mechanism of the Fed. The softer tone and, as a consequence, the willingness to tolerate inflation above the target of 2% will stimulate further weakening of the US dollar, and may also push the price of gold above 2000 per ounce.

Now let's move on to the oil market. The publication of the report from the American Petroleum Institute provided unexpectedly strong support to the "black gold", fixing a decrease in reserves by more than 9.5 million barrels. If the US Department of Energy confirms this, the demand for oil will increase, and WTI quotes may return above $40 per barrel.

That’s all for me. Closely monitor the news background and be prepared for all the surprises of the market.


 

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