8 July, 2016
Dollar bulls were offered some encouragement during trading on Thursday following the impressive ADP non-farm employment change of 172k which rekindled some hopes of a possible US rate rise in 2016. For an extended period, the Dollar has been pressured with bears on the prowl, as expectations over the Fed taking any action dwindle amid Brexit concerns. Although US data continues to point to domestic economic stability, the persistent global instability has exposed the nation to noticeable downside risks. These risks continue to obstruct the Fed’s efforts to raising US rates, consequently leaving the Dollar vulnerable to losses.
Dollar sensitivity could heighten as investors direct their attention towards the heavily anticipated NFP report which could offer additional clarity on the health of the US economy. While a rebound from May’s dismal NFP report may elevate the Dollar slightly higher, questions should be asked if this would be enough to impress the Federal Reserve which is currently on standby. Although short term gains may be a possibility amid rising US rate hike expectations, the persistent uncertainty could keep prices depressed in the longer term. From a technical standpoint, the Dollar Index is struggling above 96.00 and a breakdown below this level could open a path towards 94.00.
Stock markets brace as NFP looms
Asian stocks strolled into the red territory during trading on Friday amid faltering oil prices and growing caution ahead of the NFP report. The caution from Asia could affect European markets which are already engrossed in a fierce battle against the persistent post-Brexit uncertainty. Wall Street was left vulnerable to losses on Thursday following the abrupt decline in oil prices and could be poised to trade lower today if risk aversion encourages anxious investors to scatter away from riskier assets. With the horrible mix of Brexit anxieties, global growth fears and depressed oil prices weighing on global sentiment, stock markets could be exposed to further losses moving forward.
WTI Crude cuts below $46
WTI Crude tumbled lower this week with prices cutting below $46 as a combination of profit taking and ongoing Brexit anxieties encouraged bearish investors to attack. The lingering oversupply concerns have repeatedly capped most upside gains, and with US crude oil inventory data displaying a smaller than expected weekly decline in crude oil inventories, more downside could be expected in the future. Sentiment remains bearish towards WTI crude and the awful combination of oversupply concerns and fears over a decline in global demand could send oil prices back towards $43. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. The sharp breakdown below $46 may have opened a path towards $43 and potentially lower.
Gold awaits NFP
Gold experienced a slight correction during trading on Thursday following the positive US ADP non-farm employment change which bolstered some expectations over the Fed taking action in 2016. Regardless of the short term losses, this precious metal remains fundamentally bullish and could be destined to appreciate further when the ongoing global growth concerns renew a wave of risk aversion consequently boosting safe-haven appetite. Investors remain cautious and with the persistent post Brexit uncertainty boosting appetite for safe-haven assets, Gold could be set to appreciate further. A disappointing NFP on Friday could provide a foundation for bulls to install a heavy round of buying that could send the metal to fresh two year highs. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has crossed to the upside. The breakout above $1350 could open a path towards $1385 and potentially higher.
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