18 November, 2016
Sterling staged a vicious rebound against the Dollar during trading on Thursday following October’s extraordinary 1.9% rise in retail sales which questioned if the ongoing Brexit woes had any negative impact on British consumption. Sales for October surged by 7.4% from a year earlier, jumping the most since 2002 as cooler weather increased spending on fashion lines while supermarkets benefited from Halloween. Although October’s retail sales has added to the basket of attributes which continue to ease some Brexit concerns, it still remains too early to measure the impacts of Brexit to the UK economy with more time needed. With employment growth on a potential decline and disposable income under fire amid a weakening pound, fears have heightened over the sustainability of the post-Brexit positive data boom. The real impacts and uncertainties revolving around the Brexit may be felt in 2017 if article 50 is invoked.
Sterling bulls were provided another false lifeline following the retail sales report with bears exploiting this opportunity to drag the GBPUSD lower. This pair is under pressure on the daily timeframe and a breakdown below the stubborn 1.2400 support could encourage a decline lower towards 1.2200.
Dollar lurches to 14 year high
Dollar bulls were unchained on Wednesday with the Dollar Index flying to fresh 14 year highs above 100.50 as bets intensified over the Federal Reserve raising US rates in December. The upsurge was complimented with the Trump effect as optimism rose over an improvement in economic growth in the United States under a Trump presidency. With the probability of a rate hike before year-end nearing 100%, the Dollar could remain buoyed with any weakness seen as a technical correction for another rally.
Investors may direct their attention towards the myriad of data releases from the States on Thursday which may play as key checker pieces ahead of December’s Fed policy meeting. The important CPI and unemployment claims report could provide the Dollar another welcome boost if both exceeds expectations and point to further economic stability. Much focus may be placed on Yellen who will be addressing Congress for the first time since Donald Trump’s market shaking victory. If Yellen adopts a hawkish stance and signals for future interest rate increase amid the plans for fiscal stimulus, then the Dollar may rise as bulls install repeated rounds of buying.
Dollar remains king across the markets with Dollar strength suppressing most other currencies. From a technical standpoint, the Dollar Index is heavily bullish on the daily timeframe as prices are trading above the daily 20 SMA while the MACD has crossed to the upside. Previous resistance around 100.00 could transform into a dynamic support which could trigger another incline towards 100.50 and potentially higher. Bulls remain in control above 99.00.
OPEC – Del or no Deal
WTI Crude was left vulnerable to losses once again during trading on Wednesday after official inventory reports displayed a larger than expected build in U.S oil stocks. Oil prices have been on a messy roller coaster ride this month as the conflicting combination of oversupply fears and optimism towards production freezes created extreme levels of volatility. It seems that despite all the talks of OPEC and Non-OPEC members working together to fight the oversupply woes, optimism has deteriorated over any meaningful freeze deal in November’s formal meeting. With Saudi Arabia, Iraq and Iran still at odds over the production curbs, this could be another meal ticket for bears to drag WTI lower. Bears simply need to conquer the $45 support to encourage a further decline towards $43 and potentially lower.
Commodity spotlight – Gold
Gold ticked slightly higher today and this has nothing to do with an improved sentiment towards the metal but profit taking above the stubborn $1210 support. This metal remains heavily pressured by the rising US rate hike expectations while Dollar strength has capped most upside gains. As of writing the metal may be in the process of a technical bounce with the $1250 resistance becoming an attractive level for sellers to jump back in. From a technical standpoint, previous support around $1250 could transform into a dynamic resistance that may trigger a decline back towards $1210.
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