US Inflation Has Not Cooled: Fed Rate Hike on the Way

The failure of inflation to cool and expectations of a Fed rate hike could suppress risk appetite. SPX fell 1.8% over the past 24 hours to 7,548 and is trading below its SMA50 (7,563); this is a weak technical picture in the short term. However, with RSI around 55 (neutral) and MACD above its signal line (albeit in negative territory), it is not oversold. Rate hike news could increase selling pressure in the short term, but SMA20 (7,478) may act as support. Therefore, I forecast a mildly downward but cautious bias for the next 1-3 days.

The news could strengthen expectations of a Fed rate hike, creating upward pressure on the DXY in the short term. However, technical indicators already point to a weak outlook: RSI at 39 is near oversold territory, MACD is below its signal line, and the price is slightly below the SMA20/SMA50. Therefore, the impact of the news may be limited and the reaction short-lived. Whether the dollar index can hold around 101.80 will be decisive; a close above 102 would confirm the upward direction.

Inflation not cooling and expectations of a Fed rate hike are a negative short-term catalyst for gold. However, GLD's last close of 4102.7 is well above its SMA20 and SMA50; there is an inconsistency between price levels and moving averages in this data set, so I approach the signal with caution. With RSI at 62 it is not in overbought territory, while MACD is slightly below its signal line and points to a weak momentum deterioration. If rate-hike expectations strengthen, selling pressure on spot gold and GLD could increase. Still, given the possibility that the news is already priced in, I keep confidence in the downside at a moderate level.