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Abstract: U.S. inflation in August remains sticky. After the data was released, the USD initially rose across the board, but soon lost momentum. Gold fell to US$1,905, the lowest level since August 5, and then narrowed the decline.

Fundamentals

U.S. underlying inflation grew faster than expected on a MoM basis in August, underscoring the struggle to ease price pressures.

According to data released by the U.S. Bureau of Labor Statistics on Wednesday, the annual rate of CPI in the U.S. without seasonal adjustment recorded 3.7% in August, the highest since May this year, and it has rebounded for the second time in a row; The core CPI recorded an annual rate of 4.3%, the lowest since September 2021, which has been declining for six consecutive months; In August, the seasonally adjusted monthly CPI rate in the U.S. recorded 0.6%, the highest since June 2022.

Due to soaring gasoline prices, consumer prices in the U.S. recorded the biggest increase in more than a year in August, but the slowdown in core inflation growth may still encourage the Fed to keep interest rates unchanged next week.

According to EIA data, gasoline prices accelerated in August, reaching a peak of US$3.984 per gallon in the third week of the month. Affected by this, the overall CPI climbed to 3.7% in August. Although it is the second consecutive recovery, the data has dropped from the peak. In addition, the annual rate of core CPI recorded the smallest increase since September 2021.

CME's "Fed Watch" tool shows that financial markets generally expect the Fed to keep its policy interest rate unchanged next Wednesday. However, it is still possible to raise interest rates in November, because inflation in the service industry excluding housing is still at a high level. In addition, inflation is still facing upward risks. If the strike in the automobile industry lasts for more than one month, it may disrupt the supply chain and push up the price of automobiles.

However, such data does not constitute a trend. The Fed will not raise interest rates at its next meeting but prefers to look at the situation in October and November before deciding whether to raise interest rates again. Today's figures are not much different from expectations, so they will not be shaken.

Overall, the market finally welcomed their long-awaited inflation report, because it is a meaningful inflation report that shows the normalization of service industry inflation. This inflation report puts the Fed in a more comfortable wait-and-see state-slightly higher than expected inflation comes from changes in energy prices, but at present, the Fed should not be too worried.

Technical Analysis

Gold prices fell on Wednesday, hitting their lowest point in more than two weeks, pressured by new strength in the USD.

U.S. inflation rose in August due to higher energy prices, partially offsetting widespread expectations that the Fed will end the year with a rate hike (boosting USD buying) and reducing gold's appeal to investors.

The structure in the 1D timeframe is weakening, with fresh weakness finally breaking below the 200-day SMA at US$1,919 and marking the end of three days of consolidation as the near-term focus turns lower. Meanwhile, declining momentum is about to enter the negative zone and SMAs are turning fully bearish, increasing downside risks. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 1919

Target price: 1895

Stop loss: 1940

Deadline: 2023-09-27 23:55:00

Support: 1903, 1895, 1885

Resistance: 1923, 1930, 1934