The Dollar Index staged an incredible bounce with prices smashing through 93.50 during trading on Thursday as expectations grew over the possibility of another US rate rise in 2016.
Although the air of excitement provided a temporary foundation for bulls to propel the Dollar higher ahead of Friday’s heavily anticipated NFP report, sentiment remains strikingly bearish towards the Dollar. Investors should keep in mind that US data continues to follow a tepid path while ongoing global instabilities have exposed the nation to downside risks. While the Fed has refocused on domestic data as a means of raising US rates, concerns over faltering economic growth and static levels of inflation could however be sabotaging efforts by the central bank to take action. If the NFP does manage to exceed expectations then this could trigger the final leg of a relief rally that could provide an opportunity for bearish investors to send the Dollar Index lower.
From a technical standpoint, the Dollar Index is bearish on the daily timeframe as there have been consistently lower lows and lower highs while the MACD trades to the downside. Previous support at 94.00 could transform into a dynamic resistance for a deeper decline towards 90.00 in the medium term.
GBPUSD pressures 1.4500
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Sentiment towards the UK economy received a heavy blow during trading this week following the painful string of PMI misses that renewed concerns over a potential slowdown in economic momentum. It is becoming increasingly clear that the elevated concerns over the immeasurable impact of a Brexit have taken their toll across the board with UK manufacturing, retail sales, and average earnings all entering a slippery decline.
Investors should also keep in mind that the overstated appreciations of the Sterling against the Dollar had nothing to do with an improved sentiment towards the UK economy that is currently entangled in a battle with falling GDP growth. As the EU referendum looms, uncertainty may be amplified and this could spell more pain for the depressed Sterling that has already been punished by diminishing investor attraction. This combination of Brexit fears, tepid UK data, and global woes continue to provide a compelling reason as to why the Bank of England may not raise UK rates in 2016.
The GBPUSD tumbled heavily on Thursday and may be poised for further declines if prices attain a weekly close below 1.4500. From a technical standpoint, the GBPUSD is turning bearish on the daily timeframe. Although prices are trading above the daily 20 SMA, a solid daily close below 1.4500 could open a path lower towards 1.4400.
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Crude Oil above $44
The WTI Crude saga continues with oil prices finding support above $44.00 despite crude oil inventories rising by 2.8 million barrels in the final weeks of April. Although crude oil inventories have increased incessantly for an extended period crude oil prices have failed to tumble lower.. While the weakening Dollar may have assisted in keeping prices buoyed, the firm fundamentals of faltering demand and excessive oversupply should provide a platform for bearish investors to attack. Although there could be a possibility that the commodity has entered standby ahead of the OPEC meeting in June, bears could exploit the signs of exhaustion displayed in the current bull run. From a technical standpoint, a breakdown below $44 should open a path towards $41.40
Commodity spotlight – Gold
Gold experienced a noticeable decline during this trading week following a mixture of profit taking and Dollar resurgence that encouraged bears to send prices back towards the $1270 support. Regardless of these short term losses, the yellow metal remains bullish and the ongoing concerns over the state of the global economy may eventually magnetize investors back to its safe-haven allure. If the NFP result on Friday fails to hit expectations, then the combination of Dollar weakness and fading US rate hike expectations could provide a foundation for buyers to send prices back towards the $1305 regions. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has crossed to the upside. Previous resistance at $1270 could transform into a dynamic support for an incline back towards $1305.
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