Both fundamental and technical studies agree on continued dollar strength and lower gold

WASHINGTON (July 7)  This week market participants have focused intently on the future actions of the Federal Reserve as it pertains to rate hikes to be announced at the upcoming July and September FOMC meetings. Since 2018 the Federal Reserve has only raised rates on three occasions. However, all three rate hikes were announced and implemented at the last three FOMC meetings (March, May, and June).

Expectations are that the Federal Reserve will raise rates at both of the next two FOMC meetings in July and September. According to the CME’s FedWatch tool, there is a 93.9% probability that the Federal Reserve will raise rates by 75 basis points at the end of this month. This is over a 10% increase from yesterday’s FedWatch tool which predicted that there was an 83.8% probability of a 75 basis point rate hike.

This increase is a reflection of the hawkish minutes from last month’s FOMC meeting which were released today. The release of the minutes from the June FOMC meeting coupled with hawkish statements from many Federal Reserve voting members had a strong bullish influence on the dollar and a bearish influence on gold. Now for the second day this week, we have seen the dollar gain value moving to a 20-year high and gold continue to lose value now at the lowest value since last year.

Current support and resistance levels of gold and the dollar

The current trend of dollar strength and gold weakness could find technical resistance/support close to their current values. Of course, there is an obvious caveat to the statement above. The caveat is that both the dollar and gold have been fueled by headlines that reduce the accuracy of technical studies to forecast financial markets.

KITCO