Senior Trader Daily Update 17 August 2017

Good morning everyone.
 
A mixed day for gold on Wednesday, the precious metal closed higher in XAU/USD terms but remained under pressure in XAU/AUD terms as the major currency pairs (EUR, JPY, AUD) saw the Greenback weaken due to the release of ‘dovish’ minutes from the most recent meeting of the US central bank’s Federal Open Market Committee. Divergent opinions from committee members regarding the timing of future interest rate increases were also evident.
 
Key takeaways from the minutes:

• MOST FED OFFICIALS SAW INFLATION PICK-UP OVER NEXT COUPLE YEARS

• MOST FED OFFICIALS BACKED B/SHEET MOVE AT `AN UPCOMING MEETING'

• MANY FED OFFICIALS SAW WEAK INFLATION DUE IDIOSYNCRATIC FACTORS

• SOME OFFICIALS CONCERNED BY WEAK INFLATION, ARGUE FOR PATIENCE

Further:
 
"Although several participants were prepared to announce a starting date for the program (balance sheet unwind) at the current meeting, most preferred to defer that decision until an upcoming meeting while accumulating additional information on the economic outlook and developments potentially affecting financial markets.
 
"Participants also considered equity valuations in their discussion of financial stability. A couple of participants noted that favourable macroeconomic factors provided backing for current equity valuations; in addition, as recent equity price increases did not seem to stem importantly from greater use of leverage by investors, these increases might not pose appreciable risks to financial stability."
 
As noted above, XAU/AUD was pushed lower entirely due to the rally in the AUD against the USD but support emerged at the AUD 1612.50 level (as was also the case on August 10th). The strength of support at 1612.50 remains to be seen, however any further retreat from the recent high back towards the 21 Day moving average at AUD 1598.50 would still considered technically corrective in nature and would likely draw in the dip buyers.
 
XAU/USD found good support at its 21 Day moving average and bounced away nicely resulting from the dovish FOMC minutes, ultimately going on to erase the entirety of Tuesday’s decline and thereby posting a “bullish engulfing” candlestick on the Daily chart which augurs well for a continuation of the journey towards the major resistance at the psychologically and technically important USD 1300.00 level.
 
Finally, in the fwiw category, effective immediately India has banned the export of gold products with a purity level of over 22 carats (91.67% gold) in an apparent attempt to close a tax loophole.
 
Good luck.
 
Regards,
Andre