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Gold is steady before extreme macro week

This week brings central banks' decisions, interest rates, inflation, GDP, and unemployment data in Europe and USA.

The week of central banks

This week is definitely one of the most watched for the next few months. The week is full of inflation rates, CPIs, PPIs or ECB and Fed decisions about interest rates. The whole market will watch whether the most powerful banks in the world are more hawkish or dovish and what signal will they send to investors and traders.  On Wednesday the 1st the Fed will announce its decision about the interest rates and the following monetary policy. Current rates are 4.5% and the consensus is awaited at 4.625% or 4.75%, which underlines the slower rate hikes policy. 

Read more: Dow Jones shows indecision ahead of key weak

Higher than the consensus number could be a strong hawkish policy and can support the US dollar. Consequently, tighter policy keeps the market short on breath and negatively affects markets. It seems that a 25bps hike is acceptable and already counted in the market. Different numbers than awaited can spike the volatility. 

Gold steady before Fed

The lower volatility is now seen in the commodities as well. Gold is trapped in a 1.22% side move. Markets are nervous and steady before the next monetary meeting from Fed. For the last 10 days, gold has been steady in the side move area from $1934 to $1959. Moreover, this side move cumulated the most volume this month and left several levels of interest. This volume is shown as a histogram on the right side of the chart. 

30 minutes chart of GC (Gold Futures), Monthly Volume Weighted Average price, and side move. Source: Author's analysis

30 minutes chart of GC (Gold Futures), Monthly Volume Weighted Average Price, source: author’s analysis

The closest support on monthly data could be developing VWAP at $1914. Lower support could be around another volume spike right under the $1900 price tag. The move will be as strong as potentially surprising monetary policy will be. Being too hawkish can send gold lower because of a stronger dollar and vice versa with a dovish scenario. 

We analysed also: Coal slowly slides down, but defends 200/day average 

Macro week 

This week is not just about Fed, despite the fact that US central bank has the most attention. A lot of macro data from Europe will be released, such as GDP, unemployment, inflation, and interest rates in the Eurozone. Friday will bring Non-farm payrolls and unemployment data from the US.

It is very important to have in mind that any technical analysis is not reliable in the terms of this week. Such strong macro data could spike volatility on both sides in unprecedented numbers. Trading can be more risky and typical money management can lead to many stops in trades. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...

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