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Gold, Dollar & Nasdaq React to FOMC Decision, Fresh Projections

Gold, Dollar & Nasdaq React to FOMC Decision, Fresh Projections

2020-09-16 18:15:00
Rich Dvorak, Analyst
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GOLD, US DOLLAR, NASDAQ - MARKETS REACT TO SEPTEMBER 2020 FED MEETING

  • FOMC decision leaves the target federal funds rate on hold near zero as expected
  • Fed officials upgraded economic projections for GDP, unemployment and inflation
  • Nasdaq edges higher while the US Dollar and gold price action whipsaw in response

The Federal Reserve just released its latest monetary policy statement where the central bank reiterated its dovish position. The September 2020 FOMC Statement stated that the benchmark federal funds rate was left unchanged at 0.00-0.25% as expected. The Fed announcement also revealed intent to continue purchasing Treasury securities and agency mortgage-backed securities at least at the current pace. Interestingly, two Fed officials dissented from the latest FOMC decision as they opt for greater flexibility on policy going forward.

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FOMC SUMMARY OF ECONOMIC PROJECTIONS - SEPTEMBER 2020

fomc decision economic projections september 2020 federal reserve meeting

Chart Source: Federal Reserve

The September Fed announcement also included updated quarterly economic projections. The Federal Reserve upgraded nearly all of the key economic variables tracked - like real GDP, unemployment, and inflation - compared to June forecasts.

US DOLLAR INDEX PRICE CHART: 5-MINUTE TIME FRAME (16 SEP 2020 INTRADAY)

US Dollar Index Price Chart DXY

Chart created by @RichDvorakFX with TradingView

The US Dollar reacted negatively immediately after the September FOMC statement crossed market wires. USD price action has since whipsawed back higher to trade about flat intraday, however, and could be due to relatively better US economic outlook.

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GOLD PRICE CHART: 5-MINUTE TIME FRAME (16 SEP 2020 INTRADAY)

Gold price chart xau usd

Chart created by @RichDvorakFX with TradingView

Gold price action is mirroring the direction of the US Dollar. The precious metal extended higher right after the FOMC statement was released, but has since dropped back toward session lows. Gold could stay relatively supported, however, with the Federal Reserve looking likely to let inflation moderately overshoot its 2% average objective.

Gold BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% -4% 0%
Weekly 9% -10% 5%
What does it mean for price action?
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NASDAQ PRICE CHART: 5-MINUTE TIME FRAME (15 SEP TO 16 SEP 2020)

nasdaq price chart stocks react to september 2020 fomc decision

Chart created by @RichDvorakFX with TradingView

As for major stock indices, the Nasdaq is pushing higher as investor risk appetite remains unscathed with the Fed reiterating its ‘lower for longer’ stance and intent on keeping the printing press greased up. After the digesting the immediate reaction to the September 2020 FOMC statement and updated economic projections, traders now shift focus to the follow-up press conference led by Fed Chair Jerome Powell scheduled for 18:30 GMT.

Keep Reading - US Dollar Price Forecast: USD Descending Triangle for FOMC

-- Written by Rich Dvorak, Analyst for FxNews.com

Connect with @RichDvorakFX on Twitter for real-time market insight

FxNews provides forex news and technical analysis on the trends that influence the global currency markets.

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