Dollar gains ahead of Yellen’s speech, Oil rises and Euro ticks down

Dollar gains ahead of Yellen’s speech, Oil rises and Euro ticks down

Dollar gains ahead of Yellen’s speech

Dollar rose by 0.4% supported by of the remarks of New York Fed President William Dudley claimed on Monday that the Fed sees interest rates rising gradually given factors driving inflation lower are fading and US economic conditions are supportive.

While Charles Evans was more cautious and called for taking prudent steps to deal with rates hike showing some inflation concerns.

Of course, the biggest focus will be on Janet Yellen’s speech this evening regarding inflation, uncertainty and monetary policy.

I see diminished possibilities of a third interest rates hike this year.

In the forthcoming weeks, we will witness developments with the approval of the  new healthcare bill and the tax reforms project.

Emphasis should be placed on the content of the decision and details such as tax reduction for companies and individuals, and whether the reduction will include a retroactive effect from the beginning of the year, this may support the economy and improve liquidity.

Oil rises

Oil prices have seen notable gains, WTI crude rose to a five-month high while Brent reached a two-year high.

This rise was driven by two factors:

• Kurdistan’s independence referendum, which could result in armed conflict and intervention by the Turkey. This will reduce oil supplies coming from the Gulf region to the world.
• And stronger joint compliance from OPEC and non-OPEC producers in order to reduce supply, by extending the cut-off agreement, led by Russia, the main oil producer in addition to Saudi Arabia and the UAE.

Technically oil maintains a bullish bias, and there is room for a move towards 53.40 in the near term and then 55.50, the 55.50 will set the way for further advances.

Euro ticks down

The Euro weakened evidently in recent days and this is due to profit taking as well as the dollar’s strength.

The euro reached a one-month low yesterday following ECB’s Draghi remarks which stated that the central bank decides fate of quantitative easing by the end of the year.

He pointed out that that currency volatility is a source of uncertainty which needs monitoring while he also added that “ample” ECB accommodation was still required.

This weighed heavily on the currency driving it below the 1.1820 level (a key defensive line), and confirmed a Bearish reversal pattern that could push the currency towards 1.1750-1.1720 before any new upwards leg can be initiated.