Dollar on standby ahead of US inflation report

The Dollar edged lower on Thursday following August’s disappointing US retail sales report which thoroughly dampened expectations over the Federal Reserve raising US interest rates next week. Headline retail sales fell 0.3% marking its first decline in five months while industrial production stumbled to -0.4% simply cemented concerns overthe health of the US economy.

Repeatedly conflicting comments from Fed officials on US rate timings had already left the Dollar under noticeable pressure with yesterday’s soft retail sales potential providing a foundation for bears to attack. While it is widely expected that rates are left unchanged next week, the element of surprise continues to leave investors on edge. There could be a possibility that the Federal Reserve observes US economic data in Q4 before justifying raising US interest rates in December.

Attention may be directed towards Friday’s US inflation data which could provide further clarity on the health of the US economy. Price stability is one of the key prerequisites for the Fed to take action with a US inflation which displays signs of improvement potentially renewing optimism over the central bank pulling the trigger this year.

From a technical standpoint, the Dollar Index is almost on standby with prices trading within a modest range. A breakdown below 95.00 could encourage a steeper decline towards 94.00.

WTI OIL FINDS COMFORT BELOW $44

WTI bears were unleashed this week with prices sinking to the lows of $43.24 as the persistent oversupply concerns haunted investor attraction towards the commodity. Wednesday’s shocking build in US distillates inventories enticed sellers to attack while the fading optimism over September’s informal OPEC meeting quelling the oversupply has ensured Oil remains depressed.

With major oil producers still engaged in a self-fulfilling quest to reclaim market share, this is a bears world and
steeper declines are expected. There will be an increasing focus on the pending informal OPEC meeting in September which most hope could provide a solution to the oversupply woes. If the meeting follows the same pattern as Doha with investors left empty handed, then WTI could be poised for steeper declines.

From a technical standpoint, WTI is under pressure with the decisive breakdown below $44 enticing bears to drag prices lower towards $41.

COMMODITY SPOTLIGHT – GOLD

Gold stumbled to fresh two week lows on Thursday around $1309 as the ongoing uncertainty over the Federal Reserve policy encouraged investors to offload positions. Although expectations have been thoroughly discounted over September being a live meeting to raise US interest rates, the element of surprise has left investors on edge consequently punishing Gold. It seems likely that price action is driving Gold prices lower as the technicals are bearish on the daily timeframe.

While further declines could be expected in the early sessions of Friday morning, the pending US inflation report this afternoon has the power to provide Gold a lifeline or even drag the commodity lower. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. If bears conquer the intraday $1315 support then the next target could be $1305.