19 December, 2018
Sterling bulls were clearly in the driver’s seat today despite Brexit related uncertainty and ongoing political drama in Westminster leaving investors on edge.
For those who may be wondering why the Pound is appreciating in such unfavourable market conditions, the answer can be found in the Dollar’s performance. Anticipation ahead of the Federal Reserve rate decision on Wednesday is clearly impacting appetite for the Greenback and this continues to support the Pound. Although the GBPUSD has the potential to edge higher in the near term, bulls are certainly living on borrowed time. With Brexit related uncertainty haunting investor attraction towards the Pound, the outlook remains tilted to the downside.
The technical picture suggests that bears still remain in firm control on the weekly charts with resistance found at 1.2700. For as long as the GBPUSD remains below this level, a move back towards 1.2500 is on the cards.
It was another day another yearly low for oil prices as oversupply concerns and fears over falling demand injected bears with a renewed sense of confidence.
The risk-off market mood worsened matters for oil markets with WTI Crude sinking below $48.00 as of writing. With no signs of markets tightening after OPEC and Russia’s pledge to cut production and global growth fears fuelling concerns over a drop-in demand for oil, the outlook for WTI and Brent remain fundamentally bearish. The technical perspective is incredibly bearish with a weekly close below $50 on WTI likely to open a smooth path towards $44.00.
Canadian Dollar bears were unstoppable today mostly due to depressed oil prices with the USDCAD lurching towards levels not since June 2017 at 1.3500. With the CAD heavily impacted by falling oil prices, the USDCAD is seen challenging 1.3500 in the near term. Investors will continue to closely observe if bulls are able to secure a solid daily close below the 1.3450 level.
The main drivers influencing Gold’s trajectory this year mostly revolved around rate hike speculation, geopolitics, and the Dollar’s performance.
Mounting expectations over higher US interest rates exposed Gold to losses so severe that prices plunged to a yearly low near $1160 in August. Although geopolitical risk factors in the form of global trade tensions, Brexit-related uncertainty, emerging market chaos and political risk in Europe accelerated the flight to safety, Gold struggled to benefit. Confidence over the health of the US economy transformed the Dollar into the go-to currency in times of uncertainty. While risk aversion reigned during the latter part of 2018, buying sentiment towards the precious metal remained muted as investors rushed to the Dollar instead.
There was a visible change of sentiment in recent weeks after dovish comments from Fed officials and soft economic data from the United State forced investors to re-evaluate the Feds hiking path for 2019. With expectations in the air over the Fed taking a pause on rate hikes next year and concerns of economic growth in the US decelerating weighing on the Greenback, Gold has the potential to shine brightly in 2019. Technical traders will be closely watching to see if the previous metal can end the year on a bullish note above the $1260 resistance level.
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