Has the dollar’s bullish phase ended? What will be the fate of the Pound after the Brexit? Will oil continue its progress?

Has the dollar’s bullish phase ended? What will be the fate of the Pound after the Brexit? Will oil continue its progress?

Posted on Thursday, September 20 2018 at 1:56 pm GMT+0000

Has the dollar’s bullish phase ended?

An interest rate hike next week has become certain. The probability for a fourth rate hike in December currently rests at around 90% according to US OIS, and for these reasons I see no new incentive to support a new dollar rise in the coming period.

Also, let’s not forget the disappointment in the US inflation data. These results make the dollar less attractive as a safe haven compared to bonds and others.

I do not expect a rise in the dollar in the coming months and until the Fed meets and announces the next year’s monetary plan. If they look more hawkish than the market expects, the Dollar will recover, but at the moment the risks are still pointed to the downside.

So as we mentioned that the rate hike has become extremely priced and the quality of the economic data has deteriorated, and technically, charts started revealing bearish reversal signals so we expect the dollar to decline in the coming period towards 93.50 and then 92.00.

What will be the fate of the Pound after the Brexit?

The GBPUSD rose and posted a fresh two-month High, trying to break the 1.3270 resistance level.

The Pound’s rally was supported by the decline in the dollar index on the first hand and Brexit hopes on the other hand.

The Irish Border is a key issue in the Brexit talks. I expect Sterling to remain turbulent for a very long period. Even after the date of the break-up or the Brexit in March 2019, unclearness will emerge after the transition period ends in December. The Brexit agreement, even if it is reached, does not oblige the parties to any terms. Thus the datum of the relationship between the parties will actually appear after December.

Will oil continue its progress?

Oil continued to rally, boosted by a larger-than-anticipated drawdown in the weekly EIA crude inventories yesterday. The report showed a contraction in the drawdown from 5.3 million barrels to 2.1 million, while a drawdown by roughly 9.7 million barrels was projected. Which indicates that the demand for oil has risen.

But overall there is still conflicting elements controlling the movements of oil prices, including geopolitical and logistics. Drilling platforms in the US are rising again, but generally when there is a clash of fundamentals we look to technical analysis.

The charts are revealing a sideways move in medium term, although the long term uptrend is still intact. A break above current levels at 71.50 will reinforce the Bullish momentum and open the way for a retest of the previous highs at 73.50 and 76.00. A drop below 63.30 would confirm end the bullish path and open the way for deeper declines towards $59.