The Sterling swiftly retreated across the board during trading this week as the toxic cocktail of tepid domestic data and renewed Brexit concerns provided a firm foundation for sellers to attack. Sentiment towards the UK economy remains shaky and the painful string of PMI releases last week has left a mark which may have elevated concerns over a potential slowdown in economic momentum.
With the E.U referendum slowing closing in, it is becoming quite clear that the heightened anxieties over the impacts of a Brexit to the UK economy continue to negatively impact domestic data. Investors may direct their attention towards the UK Manufacturing Production and if this also fails to exceed expectations, then the Sterling could be left vulnerable to further losses.
While the GBPUSD bulls may be commended on their resilience, this has nothing to do with an improved sentiment towards the pound. This pair remains bearish on the daily timeframe and the fading expectations over the Bank of England raising UK rates should offer an opportunity for bears to install another round of selling. From a technical standpoint, prices are marginally above the daily 20 SMA while the MACD looks to be in the process to turning to the downside. A breakdown below 1.440 could open a path towards 1.410 in the medium term. Bears could retain firm control as long as the 1.450 resistance defends.
Dollar Index challenges 94.00
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The Dollar Index bulls displayed an incredible rebound from 92.50 during trading this month despite expectations rapidly diminishing over the Federal Reserve raising US rates in Q2. With the fundamentals clearly pointing to the downside, this technical bounce in the Dollar could offer an opportunity for sellers to send the currency lower. It should be remembered that data from the States has followed a soft path while the unstable financial landscape continues to expose the world largest economy to downside risks.
As Friday’s poorly NFP figure of 160k rapidly eroded any surviving optimism towards the Fed taking any action, Dollar weakness remains the dominant theme that ripples across the markets. Although the Dollar Index has surged with vigor, exhaustion is inevitable with prices sinking back towards 92.50.
Gold rebounds from $1257
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Gold prices surged during trading on Tuesday with prices lurching towards $1280 after the decisive break above the $1268 intraday resistance. As discussed in Tuesday’s report, this metal remains fundamentally bullish and could be destined to surge towards $1308 with risk aversion boosting its safe haven allure. With US rate rise expectations rapidly fading into the distance and Dollar vulnerability becoming the dominant theme in the global markets, bullish investors have been provided the platform needed to attack relentlessly.
From a technical standpoint, prices bounced from the daily 20 SMA while the MACD also trades to the upside. The new higher low created around $1257 may pave a path towards $1280 and potentially higher.
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