Sterling shivers ahead of UK Q3 GDP

25 November, 2016

The ongoing Brexit saga has exposed Sterling to prolonged periods of pain this year with uncertainty effectively damaging buying sentiment towards the currency. It has become quite clear that Brexit fears have left a painful scar on the Pound, with weakness becoming the new norm as anxiety repels investor attraction. Much attention may be directed towards the latest third quarter GDP revision which most expect to come in unchanged at 0.5% on a quarterly basis and 2.3% annually. While the unchanged GPD figures could point to some economic stability, concerns still remain elevated over the Brexit outcome diminishing business investment and consequently pressuring the vulnerable Sterling further.

Sterling/Dollar has been a major loser this year with the pair closing negative every month post Brexit. This pair remains heavily bearish on the daily timeframe with a resurgent Dollar reviving the parity dream. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. A decisive breakdown below 1.240 could trigger a steeper decline lower towards 1.220.

EURUSD parity dream…

The heightened fears over diminishing Eurozone growth coupled with ongoing political instability in Europe have left the Euro extremely vulnerable to losses. Sentiment remains firmly bearish towards the EUR with steeper declines expected as speculators bet over the European Central Bank extending its QE program at December’s policy meeting. The bearish combination of Euro weakness and a resurgent Dollar could ensure the parity dream on the EURUSD becomes a reality in the medium to longer term. From a technical standpoint, prices are bearish on the daily timeframe as there have been consistently lower lows and lower highs. Previous support around 1.065 could transform into a dynamic resistance which encourages a steeper decline lower towards 1.050.

Oil under pressure again

WTI Crude edged lower on Friday with prices sinking towards $47.40 as expectations fluctuated over OPEC securing a meaningful freeze deal at next week’s formal meeting in Vienna. The persistent discussions over major oil producers cooperating to fight the oversupply woes have provided oil a temporary lifeline but fear still linger over the success of any OPEC deal. Many investors will be paying attention to how the cartel solves this classical prisoner’s dilemma which may dictate where oil concludes this year. The overall sentiment towards Oil still remains bearish with another OPEC let down sparking a sharp selloff towards $40.

Commodity spotlight – Gold

Dollars resurgence has made Gold a sellers dream while the mounting US rate hike expectations continue to sabotage any upside gains. This metal remains under noticeable pressure with prices hovering around 9-month lows of $1170.80 as of writing. Bears remain in firm control which should encourage steeper declines in the coming weeks. Previous resistance around $1200 could transform into a dynamic resistance which encourages a steeper decline lower back below $1170.

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