The FOMC has left the interest rates unchanged in an expected move, and also released its economic projections for 2020 – 2022 at the same time. From the results, it appears the Fed is going to keep the present QE program intact for quite some time, as it projects interest rates to stay at 0.1% until at least 2022. Here is a breakdown of the economic projections from the FOMC:
Projections made in December 2019 (pre-coronavirus) were as follows:
a) GDP: 2.2% and 1.9% increase for 2020 and 2021
b) Unemployment: 3.5% and 3.6% for 2020 and 2021
c) Inflation: 1.9% and 2.0%
Today’s FOMC projections (active coronavirus pandemic situation) are as follows:
a) GDP: -6.5%, 5.0% and 3.5% for 2020, 2021 and 2022 respectively.
b) Unemployment rate: 9.3%, 6.5% and 5.5% for 2020, 2021 and 2022 respectively.
c) Inflation: 1.0%, 1.65% and 1.7% for 2020, 2021 and 2022 respectively.
The FOMC will keep buying bonds and mortgage-backed assets at the current levels, which has dispelled fears about the application of yield curve control measures to taper the stimulus, adding it would stimulate the economy using its “full range of tools.”
Download our Q2 Market Global Market Outlook
Gold price on the XAUUSD initially spiked lower on the announcement that rates would stay at current levels. However, the USD quickly lost ground across pairings on metals and currencies as details of the economic projections emerged. Gold price is now trading at intraday highs of 1731.28, which corresponds to the R1 pivot for the day. This price level has also been an area of intraday support, and resistance plays in the last one week, which allows for its use in short-term plays.
Further advance above this price level from additional dovish statements by the FOMC Chair in his press conference can spur further progress towards 1738.54, while a push towards 1753.29 remains a possibility.
On the flip side, lack of momentum could cause rejection at this intraday resistance, which sets up a decline towards 1699.27 (central pivot). This downside move needs support from the breakdown of the ascending trendline on the 1-hour chart, which connects the lows for the week.