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Fed in no rush to raise rates

Four markets in focus today: AUD/USD, Brent Crude, Spot Gold and Atlas Iron.

Fed
Source: Bloomberg

AUD/USD

The Fed essentially detailed to markets that it is in no rush to raise rates and certainly didn’t acknowledge the increase in headline inflation to the degree that markets had positioned themselves for. Once again the hunt for yield materialised despite the Fed increasing its projections for the Fed funds rate in 2015 and 2016. AUD/USD printed a bullish outside day, with price trading below Tuesdays low and going on to close above the Tuesdays high. Look for a potential move to the top of the Bollinger band at 0.9444 and even the former uptrend (drawn from the January low) at 0.9460.

Brent Crude

Brent crude pushed higher after militants attacked the Jaidi refinery in the north of Iraq. Interestingly though, the moves in oil prices certainly took a back seat to the FOMC meeting, but with Iraq asking the US for assistance on the ground, it’s difficult to believe that will still be the case going forward. With Brent pushing above the $114 level I feel Brent is now the key commodity to watch to drive other risk assets.

Spot Gold

Spot Gold strengthened with traders unwinding trade structures that took advantage of a potentially more hawkish Fed. I will include a chart on todays ‘one to watch’, however on the daily chart the key area is around $1285, which represents downtrend drawn from the April 14 high, as well as the 55- and 200-day moving average. The bulls will want to see this level give way.

Atlas iron (AGO)

Better days were seen for iron ore miners, notably in a nice move higher for AGO yesterday. Spot iron ore has moved up 1.2% yesterday, however this was reflected in the price yesterday with Dalian iron and rebar futures moving higher during Asian trade. In a speech in London overnight the Chinese premier told an audience that his country would maintain a minimum growth rate of 7.5% and that a hard lending ‘will not happen’. Naturally traders will be keen to see how various Chinese markets trade today, but simply judging by strength in BHP’s ADR (American Depository Receipt) and the good gains seen in the S&P 500 materials sub-sector it should be a good day to be long Asian mining companies.

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