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Jan 26, 2018

U.S DOLLAR SLUMP CONTINUES AS THE GLOBAL ECONOMIC RECOVERY GATHERS PACE

U.S DOLLAR DEPRECIATES

The U.S dollar index fell sharply lower this week, moving underneath the 89.00 handle, after remarks from the United States Treasury Secretary, who said a weaker U.S Dollar is good for the U.S economy and trade. The U.S dollar index slumped to levels not seen in well over three-years, falling below the key 89.00 handle. Speaking at the World Economic Forum in Davos, Switzerland, U.S Treasury Secretary Steve Mnuchin bearish comments initiated the broad-based sell-off in the greenback. AS the week progressed, traders increasingly moved into alternative currencies such as the Japanese yen and the Swiss franc.

  • The U.S dollar index remains strongly bearish while trading below the 89.90 level, further losses towards 88.00 and 87.50 seem likely.

  • A breach of the 89.00 technical resistance level may encourage buying towards the 89.30 and 89.65 levels.

EURO HITS 1.2500

The euro moved to its highest level of the year, and levels not seen since December 2014 against the greenback, as the single currency became a major beneficiary of U.S dollar weakness. The EURUSD hit 1.2530, moving above the pairs key 100-month moving average, at 1.2440, for the first-time since August 2014. Solid eurozone Manufacturing PMI'S and Economic Confidence data helped to boost the euro higher in early week trading. Comments from ECB President Mario Draghi at the ECB press conference helped to nudge the euro above the 1.2500 mark, as he stated that the European Central Bank will not directly intervene in the EURUSD exchange rate.

  • The EURUSD pair remains strongly bullish while trading above the 1.2275 level, further upside towards 1.2610 and 1.2780 now seems possible.

  • Should price-action decline below the 1.2275 level, further losses towards 1.2220 and 1.2110 appear likely.

CABLE SOARS

The British pound moved to its highest trading level against the U.S dollar since the day of Brexit this week, following solid United Kingdom Wage Earnings and Employment data. The rapid decline in the value of the greenback also contributed the move higher in cable. Price-action soared towards the 1.4350 level, as traders bought the GBPUSD pair in a relentless one-way move higher, which saw the 1.4000 barrier taken out with ease, and a number of significant upside technical levels broken in the pair.

  • The GBPUSD pair remains strongly bullish while trading above the 1.4220 level, further upside towards 1.4410 and 1.4550 seems possible.

  • Should price-action decline below the 1.4220 level, a deeper correction towards 1.4150 and 1.4000 may ensue.

GOLD SHINES

Gold continued to advance to the upside this week, climbing to a new 2018 high and reaching levels not seen since August 2016, with the value of spot gold hitting $1,364 per troy ounce. The move higher in the yellow metal was largely correlated to the falling value U.S dollar, and the inverted trading relationship they currently share. Soaring commodity prices and commodity currencies, have also helped to underpin the recent strength in the value of spot gold. Higher-yielding currencies such as the South African Rand and the Australian dollar have also received a boost from the growing confidence in the global economy.

  • Gold remains strongly bullish while trading above the $1,330 level, further upside towards $1,385 and $1,410 appears likely.

  • A decline below the $1,330 level may support selling momentum towards the $1,315 and $1,298 support regions.

 

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