Dollar broadly stronger, but will it persist? and Geopolitical developments support oil

Dollar broadly stronger, but will it persist? and Geopolitical developments support oil

Posted on Monday, April 10 2017 at 3:37 pm GMT+0000

Dollar broadly stronger, but will it persist?

The dollar fluctuated sharply after the US non-farm payrolls, the USD first dropped as the figure missed expectations. Only 98,000 new jobs were recorded, compared to a forecast of 180,000 jobs.

However, briefly after that, the dollar jumped again. As investors realized that figures are not so bad, the wage rate increased meeting expectations. The decrease in the number of new jobs was related to the retail sector and due to climatic causes, namely the strong snowstorm that hit the northern part of the country, thus this could change over the next month. Notice though that the unemployment rate fell to the lowest level in nine years, and that improvement is very positive since 4.5% unemployment rate is in line with the federal target for full employment, and these figures have emerged despite the change in the rate of labor force participation.

This report did not eliminate the possibility of further interest rate hikes, as Yellen has already indicated that 75,000 to 125,000 are good numbers, so she will be eyed later today by the markets in order to get additional hints about the possible hikes during the summer meetings. Any positive comments will push the dollar higher.

EURUSD Outlook

The euro fell against a basket of currencies, especially against the dollar, hitting a five-week low. Several factors affect the currency. Most importantly, political concerns rising from some EU countries, especially the French elections.

Current levels are considered as very significant support, and might result in the initiation of some bullish correction that might reach the 1.0620 zone, failure of the cross to break these levels will pave the way for a retest of 1.0500 in the near term.

Gold stabilized before Yellen speaks

Gold rose to a five-month high of $ 1270 per ounce on geopolitical risk pushing investors out of risky assets and into safe havens, especially between the United States, Russia and Korea. Gold consolidated Friday’s losses around 1255, but I think there are no reasons for the gold decline at the present time. All the current developments including the BREXIT concerns and Scottish demand for a new referendum, and also the Geopolitical risks support the Gold’s strength. A close above 1265 will pave the way for the 1305 in the medium term, and the supports might be provided at 1245 and 1230.

Geopolitical developments support oil but …

Oil rose for the third consecutive day, approaching a four-week high on political developments specially US intervention in Syria, as well as raising expectations that OPEC would extend its cut-off agreement for additional six months. The rise is good, but despite the agreement, the increasing number of drilling rigs in the United States does not support oil at all.

I think the supply crisis will come back dramatically if the solutions do not include big producers, especially the US. Oil is currently in a strong resistance zone so I expect some declines towards the 51.8 level, a bearish break below 51.50 will pave the way towards 50 in the coming days.