Dollar Wobbles Ahead Of Inflation Data

The appeared slightly weakened against a basket of major currencies on Wednesday, as market players directed their attention towards August’s US data release, that is scheduled for tomorrow.

Thursday’s CPI report is a big deal, especially when considering how concerns over stubbornly low inflation rates remain one of the key culprits weighing heavily on US rate hike expectations. Price action suggests that dollar bears still remain in control, as investors become increasingly sceptical over the Federal Reserve’s ability to raise interest again before the end of the year. A soft inflation figure on Thursday that falls below market estimates is likely to dent the prospect of higher US rates, consequently punishing the vulnerable dollar further.

Focusing on the technical outlook, the Dollar Index remains bearish on the daily charts. Sustained weakness back below 91.50 should encourage a further decline towards 91.00. In an alternative scenario, a daily close 92.00 may open a path towards 92.25.

Commodity spotlight – Gold
was on standby on Wednesday, amid firmer word stocks and shaky US dollar.

Although North Korean tensions have offered some support to the yellow metal, the upside could be capped ahead of Thursday’s inflation data. With the pending US CPI release likely to influence expectations over when the Fed will raise rates, gold, which remains highly sensitive to rate hike expectations, will be directly impacted. A disappointing US inflation figure should heavily support the zero yielding metal.

I believe Gold still remains attractive, despite the return of risk appetite, with further upside on the cards as heightened political uncertainty in Washington and geopolitical concerns encourage investors to seek safety.

From a technical standpoint, the metal still remains bullish on the daily charts. A breakout above $1340 should encourage a further appreciation higher towards $1350. In an alternative scenario, a breakdown and repeated weakness under $1325 is likely to encourage a decline towards $1315 and $1300, respectively.

Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

Source link

Shares
|ShareTweet

Leave a Reply

Your email address will not be published. Required fields are marked *

*