The dollar’s strength weighting on currencies and commodities like sterling and gold

The dollar’s strength weighting on currencies and commodities like sterling and gold

Posted on Thursday, May 3 2018 at 7:10 pm GMT+0000

Dollar awaiting job data

Major currencies and commodities’ underperformance was largely driven by the strength of the US Dollar.

The Dollar posted notable gains on the back of surging US bond yields, geopolitical and trade war risk premiums appears to be on the decline, and short-Dollar positions being abandoned with the greenback breaking though several technical levels. After trading within a sideways path between 88 and 91 since January, the Dollar managed to break the upper-boundaries at 91 last week. That move strengthened the Bullish momentum pushing prices towards the current levels.

Attention has turned now towards to tomorrow’s employment report. Our focus should be not only on the number of jobs added but on the wage figures, any positive surprises in those figures will help the Dollar to continue its upward rally towards 94.


The Pound lost about 800 pips against the dollar, will it continue it’s decline?

Sterling is the weakest currency against the dollar in recent times.

The Pound lost about 800 pips in the last ten days when it dropped from 1.4375 to 1.3600.

The decline was due to Carney’s comments, which pointed to some concerns about the economy and raising interest rates, easing Investors’ expectation for a rate hike. As well as a thread of disappointing economic data, including the manufacturing PMI. Brexit uncertainty looms large with an ongoing debate on whether the nation should remain within a customs union with the EU after it officially exits the bloc. And of course, the dollar’s strength contributed to the pressure on the pound.

Technically, the pound completed a long term bearish reversal pattern, raising confidence for further declines towards 1.3300. However, we may see a short term bullish correction this week before a new leg lower is initiated.


Gold testing $1300

Since the beginning of the year gold locked in a sideways path between $1300 and $1360 per ounce.

Gold has currently made an attempt to retest the support level at $1300 mainly driven by the dollar’s strength and the decline of the geopolitical and trade war risk premiums.

Overall if gold fails to breach the level of $1300 it will recover, but tomorrow’s employment report should provide some direction, as any further strength in the dollar will increase the negative pressure on gold pushing it towards $1260.