The purchase of barrels | 23 December 2022

#SP500:

Federal Reserve policymakers may need to lift U.S. borrowing costs above the peak 5.1% they penciled in just this week, and keep them there perhaps into 2024 to squeeze high inflation out of the economy, three of them signaled. The hawkish messages, delivered in separate appearances by New York Fed President John Williams, San Francisco Fed President Mary Daly, and Cleveland Fed President Loretta Mester, underscore the U.S. central bank's determination to do what it takes to ease price pressures that erode wages and strain household budgets, despite what analysts say could be a million or more jobs lost in the process. They also stand in stark contrast with expectations expressed in financial markets. Traders leaned into bets that the Fed policy rate will peak below 5% and the Fed will start cutting rates in the second half of 2023 to cushion what the New York Fed's own internal model suggests will be an economic downturn.

Trading recommendation: range 3775 - 3975.

XAUUSD:

As many expected, the Federal Open Market Committee increased the fed funds rate by 50 basis points to a target range of now 4.25–4.50%. Moreover, the committee made upward revisions to both their inflation and interest rate forecasts for the next few years. The Committee delivered a well-telegraphed move, barely changing any verbiage from the previous statement, making a unanimous decision. In addition, the Committee downwardly revised growth forecasts for both 2023 and 2024 as high inflation are expected to weigh heavily on consumer spending. Interest rates will likely be higher next year as the Committee believes inflation will not come down as fast as projected in September. This is a positive signal for gold.

Trading recommendation: buy 1770.50 and take profit 1808.40

#WTI:

The Biden administration is making good on a plan to replenish the nation’s emergency oil reserves, starting with a 3-million-barrel purchase of crude. The purchase of barrels for February delivery follows a historic 180-million-barrel release of oil from the US Strategic Petroleum Reserve. US emergency crude stockpiles currently stand at about 382 million barrels. “This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the Department of Energy said in a notice announcing the plan. This is a positive signal for oil prices.

Trading recommendation: sell 78.50 and take profit 75.40