Dollar’s rally takes a pause, China back to trading | CMC Markets Daily Commentary
Commodity currencies AUD, CAD stopped bleeding against the greenback on Monday, following sharp retracement seen last week. CAD/USD attempted to find support at around 0.750 area and AUD/USD tested 0.706 before coming back to 0.710 area. The US dollar index took a pause after seven-day rally as technical indicators show sign of overbought.
GBP/USD is consolidating around 1.293 area as markets await updates from Theresa May’s trip in Brussel to finalise the Brexit deal. The British GDP data to be released later today will probably trigger some volatility in sterling pairs, should the reading differs too much from consensus forecast of 1.4%. Bank of England (BoE) has slashed the country’s 2019 growth forecast to 1.2% in the policy meeting last week but ruled out the possibility of an immediate rate cut. Technically, GBP/USD has entered into a short-term bearish trend after hitting three-month high of 1.320 in late Jan. Its 10-Day SMA has sloped downwards and MACD is trending down, suggest downside pressure prevails.
As China markets resume trading today following a week-long Chinese New Year (CNY) holiday, it is interesting to see how market participants will react on a sudden shift in US-China trade talk. Data suggest that retail sales and holiday spending growth during the CNY period this year have fallen to single digit – the lowest level seen since 2008. This reflects further weakness in consumer sentiment and deteriorating in domestic economy, while trade war continue to dampen sentiment.
Crude oil prices is ranging at around S$ 61-63 for the past few weeks and fresh catalysts are needed to break this deadlock. Venezuela issue, OPEC+, US shale oil production are dominating the supply side whereas energy consumption in the US, China, India are dominating the demand side. A sharp fall in crude oil prices in 4Q19, alongside with fast cooling off in China’s factory prices, have rippled into deflationary pressure worldwide, and led to more dovish-biased monetary stance by central banks.
Against the backdrop of ‘patient’ Fed policy and rising trade uncertainties, gold prices have attempted to move higher following a temporary correction last week. Technically, the support and resistance levels can be found at around US$ 1,300 and US$ 1,316 respectively. The overall trend remains bullish, as its 10-Day SMA and SuperTrend (10,2) both sloped upward. Momentum indicator MACD, however, have diverged from its price movement. This suggests a failure to breakout above 1,316-1,320 would likely lead to a bigger correction ahead.
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