The U.S. dollar held steady near a one-week high against a basket of major currencies this morning as bulls remained inspired by last Friday’s strong U.S. payroll figures.
While the Greenback is seen extending gains in the near term as renewed trade optimism supports risk sentiment and elevates U.S. Treasury yields, the medium- to longer-term outlook still remains in favour of bears. It is worth noting that expectations remain elevated over the Federal Reserve taking a pause on rate hikes this year while the final effects of the 35-day government shutdown remain unknown. With the United States tackling headwinds in the form of trade tensions, global growth fears, fading fiscal stimulus at home and political uncertainty in Washington, the dollar is certainly vulnerable to downside shocks. Any signs of the U.S. economy experiencing a slowdown will most likely accelerate dollar depreciation as its safe-haven status is questioned.
Focusing on the technical picture, the dollar held onto gains this morning with prices trading around 95.90 as of writing. The upside momentum is likely to send the Dollar Index towards 96.00 in the short term. A solid breakout and daily close above this level is seen opening a path towards 96.30 and 96.45, respectively. For bears to jump back into the game, prices need to trade back below 95.20.
GBP/USD Approaches 1.3000
The endless uncertainty over Brexit is poised to heavily influence the Pound’s trajectory this week.
Although the U.K. services PMI will be published this morning and the Bank of England meets on Thursday, investors are likely to be much more concerned with Theresa May’s trip to Brussels later this week. With the European Union not open for Brexit re-negotiations, is May’s trip doomed to fail with the PM returning home empty-handed? With the Pound already spiking higher yesterday on Brexit noise and likely to remain extremely sensitive to headlines, market players should brace for another volatile trading week for Sterling.
In regards to the technical perspective, the GBP/USD seems to be edging lower on the daily charts with the 1.3000 psychological level acting as the first point of interest. A solid breakdown below this point has the potential to instill bears with enough inspiration to challenge 1.2940. If 1.3000 proves to be reliable support, the GBP/USD is seen rebounding back towards 1.3150.
Commodity Spotlight – WTI Oil
The outlook on Oil remains heavily influenced by a combination of fundamental themes. The dollar weakness, OPEC-led supply cuts and U.S. sanctions against Venezuela are factors that have supported Oil bulls. However, bears remain inspired by ongoing trade developments, record production from U.S. Shale and fears over plateauing global economic growth. Oil markets are poised to transform into a battleground for bulls and bears this quarter thanks to conflicting supply and demand dynamics. Focusing on the technical perspective, WTI Crude could challenge $58 if bulls are able to secure control above $54. Sustained weakness under the $54 level may open the gates back towards $52 and $50, respectively.
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