Dollar Looking Towards A Weaker Close

Daily Analysis - 11/09/2015

Commodity Risk Currencies Prove Outperformers Over the Course of the Week


The US Dollar is poised for a soft close for the week as the Aussie Dollar, British Pound and the Euro have managed to stage a modest rally. US Equity markets have stabilized off lows, recovering some of the declines from last week, but remain cautious into next week’s FOMC decision.

Bank of England’s MPC Votes Unchanged

The Bank of England's monetary policy decision yesterday saw no change to interest rates. The Monetary Policy Committee voting members also saw the lone dissenter, Ian McCafferty voting to hike rates, leaving the vote count unchanged at 1 - 8. The Bank of England however sounded hawkish in its statement despite revising down forecasts for third quarter GDP to 0.60%. The bank noted that the United Kingdom economy would be able to sustain any potential fallout on account of China's slowdown. The British Pound kept up its rally and looks poised to post a weekly gain close to 1.90% after declining the prior two consecutive weeks. On the daily charts, GBPUSD formed a bullish engulfing candlestick pattern which indicates further momentum to the upside.


Gold Recovering From Weekly Lows

Gold futures were trading weaker as the precious metal declined to three-week lows of $1102 per troy ounce during the week before managing to stage a recovery.  Gold was showing signs of stabilizing yesteday as the precious metal was seen rebounding from earlier losses incurred over the course of the the week. The precious metal is trading close to the previously broken support level at $1120 which could now act as resistance. In such an event, Gold futures could be looking at further declines in the coming week. In the event prices manage to break above the $1120 support, the bias could shift to the upside with an attempt to rally towards a key long term pivot at $1132 and $1145 on the upside. The precious metal remains under pressure ahead of the FOMC meeting next week on September 17th.


Australian Dollar Set for Weekly Gains

The Australian Dollar staged a strong recovery during the past few session with the AUDUSD currency pair now trading back near the 0.7000 handle after previously declining lows of 0.6926 on the fallout from major trading partner China. The strong rally in the Aussie comes amid moderate risk-off sentiment and strong economic data which was seen being positive for the Australian Dollar and the economy at large including better than expected employment figures.  AUDUSD has so far tested the highs of 0.7092 on the upside which incidentally marks a retest of a previously broken support level. In the event that prices fail to rally above this support level, AUDUSD could be looking at a new leg of declines in the coming week, keeping in-line with the prevailing longer-term downtrend.


US PPI and Sentiment Expectations Due

The US producer price index data is due for release today with the median forecasts expecting a soft decline of -0.10% on the headline and a slower pace of growth on the Core PPI at 0.10%, down from 0.30% previously. The markets might not be paying much attention to the PPI data today but a strong deviation from the median estimates could bring some uncertainty as far as future producer price inflation is concerned. The University of Michigan’s inflation expectations and consumer sentiment are due later in the evening. The median estimates for consumer sentiment is pointing to a soft print of 91.4, down from 91.9 previously as consumers engage in belt-tightening while current inflation expectations stand at 2.80%. The EURUSD pair is attempting to push higher after declining to the lows of 1.1103 in an earlier session with resistance seen near 1.1300.


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