The Greenback stumbled against a basket of major currencies during Friday’s trading session after inflation data from the US came out weaker than expected. Consumer price inflation rose by 0.1% on a month-month basis in July which dampened expectations for an additional rate increase by the Federal Reserve this year. With stubbornly low inflation clouding the prospects of higher US interest rates and political uncertainty in Washington weighing on sentiment, Dollar weakness is likely to remain a dominant theme moving forward.
From a technical standpoint, the Dollar Index dipped towards 93.00 following the inflation report and remains bearish on the daily charts. There have been consistently lower lows and lower highs while prices have found comfort below the 50 Simple Moving Average. Bears remain in control under the 93.90 lower higher and a decisive break down below 93.00 should open a path to 92.50.
Gold sprints towards $1290
Gold spiked above $1290 before retreating lower on Friday following the soft inflation data from the US which prompted markets to decrease the odds that the Fed will hike interest rates again this year. This has certainly been an interesting week for Gold as the rising geopolitical tensions between the US and North Korea boosted its safe-haven allure. With concerns over sluggish inflation punishing the US Dollar and weighing on the prospects of higher US interest rates, Gold is likely to remain supported moving forward. From a technical standpoint, Gold bulls are back in town and the breakout above $1280 increases the potential of a further appreciation towards $1300.
Commodity spotlight – WTI Oil
WTI Crude was under pressure during early trading on Friday, as the ongoing oversupply concerns continue, despite a bigger than expected drawdown in U.S Crude inventories. It is becoming clear that markets remain unconvinced over OPEC’s ability to rebalance the saturated markets and this is reflected in oil’s price action. Although OPEC had a meeting discussing compliance earlier in the week, there are growing concerns over producers such as Iraq lagging behind as the nation’s compliance slumped to 29% in June. With Iraq claiming the title of OPEC’s second biggest producer, it has a leading role in the mission to re-balance oil prices. There is a real threat that Iraq’s weak compliance may encourage other members to increase their output, ultimately weighing heavily on the OPEC agreement. If oil prices fail to recover and compliance concerns persist, there is a risk of the supply cut deal falling apart before March 2018.
Currency spotlight – EURUSD
The EURUSD remains heavily bullish on the daily charts and is poised to appreciate further as long as bulls can defend the 1.1700 higher lower. Technical traders will be paying very close attention to how prices react to the 1.1850 resistance with a breakout opening a path towards 1.1900 and 1.2000 respectively.
Silver hovers above $17
Silver has staged a remarkable rebound from the $16.10 level this week with prices hitting $17.00 during Friday’s trading session. From a technical standpoint, the metal is bullish on the daily charts as there have been consistently higher highs and higher lows. Prices are trading above the daily 20 SMA while the MACD has crossed to the upside. Dollar weakness may install Silver bulls with enough inspiration to challenge the $17.30 level. A breakout above $17.30 should encourage a further appreciation higher towards $17.70.
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