Senior Trader Daily Update 21 September 2017

Good morning everyone.
 
Precious metal values retreated after the US Federal Reserve Bank’s FOMC left interest rates unchanged (as expected) but signalled the possibility of one more rate hike in 2017 and more importantly, laid out its intentions in relation to its colossal $4.5 trillion balance sheet.
 
The US central bank intends to begin unwinding its holdings of U.S. Treasuries and MBS’s in October by initially cutting up to $10 billion per month from reinvestments. Thereafter the amount will increase by $10 billion every quarter (to a maximum of $50 billion per month) until a balance sheet reduction of at least $1 trillion has been achieved. In other words, the monetary smack that has fuelled the credit bender that the US economy has been on since the 2008 GFC is soon to be withdrawn as the central bank ‘normalises’ its money printing monetary policy and balance sheet.
 
Technically, XAU/AUD was driven below its 200 Day moving average and retreated to its 55 Day moving average, placing it in the AUD 1618 – 1631 region highlighted yesterday. XAU/AUD may find some support around the AUD 1612.50 level (see support line on attached chart) but if broken, there is very little by way of technical support until just below the psychological ‘big figure’ at XAU/AUD 1600.
 
As noted yesterday, a test of the psychological ‘big figure’ at USD 1300 appeared compelling and the FOMC announcement duly obliged. Robust support is likely to be seen at the conjunction of the 55 Day moving average and the 50% Fibonacci retracement (of the USD 1204.50 (July 10th) to 1357.50 (Sept 8th) move) presently located at USD 1281/1282. With an upcoming option expiry next week and significant interest around the USD 1300 strike in the CME’s October contract, that level may prove to be ‘sticky’ until the expiration passes (see attached open interest chart).
 
Good luck.
 
Regards,
Andre