US dollar rises as the Fed starts its monetary policy meeting
Gold, silver, and other metals declined today as investors waited for more progress on the stimulus package unveiled by Mitch McConnel yesterday. The $1 trillion packages will reduce the weekly payouts to the unemployed from the current $600 to $200 in a bid to encourage people to go back to work. It will also seek to protect companies from coronavirus-related liability. Also, it will have a $1,200 payout to American individuals. The bill differs from the one that Democrats have proposed. For example, they have proposed leaving the $600 unemployment benefit intact until January 2021.
The US dollar rose slightly today as traders focused on the stimulus package and the FOMC interest rate decision. Analysts expect that the Fed will leave the interest rate unchanged at the current range of 0% and 0.25%. They also expect the accompanying monetary policy statement to be relatively dovish considering that the number of coronavirus cases is rising. The rising cases have led many analysts to predict that the US economy will have a W-shaped recovery. The prediction was supported after the number of Americans filing for unemployment claims rose in the previous week.
European stocks were mixed today as investors reacted to mixed corporate earnings. In Germany, the DAX index declined by more than 0.3% while in France, the CAC 40 declined by 0.65%. The overall Stoxx 50 index fell by 0.35%. Among the biggest movers were PSA Group, Deutsche Bank, and French luxury brands like LVMH, Hermes, and Kering. In a statement, PSA Group, the owner of Peugeot, said that it made $696 million in net income in the second quarter. In Germany, Deutsche Bank said that its second-quarter results will be slightly above what analysts have predicted. Meanwhile, in the US, McDonald's said that its revenue declined by 30% in Q2.
The EUR/USD pair is trading at 1.1740, which is slightly above the intraday low of 1.1700. On the four-hour chart, the pair has formed a bullish pennant pattern. Also, the price is slightly above the 50-day and 100-day exponential moving averages. The accumulation and distribution indicator has also continued to rise, meaning that the price is likely to continue rising in the near term.
The XAU/USD pair declined slightly to an intraday low of 1,905, which is a significant decline from the intraday high of 1,980. On the daily chart, the price is above the 50-day and 100-day exponential moving average while the two lines of the Relative Vigor Index (RVI) have continued to rise. Also, the RSI is still in the overbought level since January this year. Therefore, the pair is likely to continue rising as bulls attempt to retest the record high of 1,980.
The DAX index dropped to an intraday low of €12,765, which is the lowest level since July 15. On the daily chart, the price has moved below the important ascending trendline that is shown in white. It is also slightly above the 23.6% Fibonacci retracement level. Also, the price is above the 50-day and 100-day exponential moving averages. Therefore, the price is likely to continue falling as bears target the 23.6% retracement level at €12,477.