The increased confidence investors acquired from the FOMC minutes regarding the high possibility of a US rate rise in December has led to investors unwinding their Dollar positions. While the unwinding of the USD may continue to encourage others to loosen USD positions, the fundamental case for USD strength remains supported, as long as the Federal Reserve raises US interest rates next month.
With the Fed moving closer to raise US rates in the near future, this short term USD weakness may provide an opportunity for devoted bullish investors to reinvest at a reduced price, especially if other central banks such as the Bank of Japan (BoJ) and European Central Bank (ECB) ease monetary policy further. The noticeable depreciation of the USD across the board has offered a false lifeline to assets that were previously being oppressed by Dollar dominance, such as an unexpected Euro that has risen to 1.0762 against the USD.
The GBPUSD has appreciated to weekly highs of 1.5335, which has been highly motivated by the unwinding of USD positions and has little to do with improved sentiment towards the Sterling. Recurrent fears over a potential slowdown in economic momentum in the UK economy complimented with the Bank of England’s hesitance towards committing itself to raising UK interest rates will encourage some profit-taking on the GBPUSD. With UK interest rate rise expectations pushed deep into 2016, this relief rally observed in the GBPUSD may offer an opportunity for sellers to send prices back lower.
Technically speaking the GBPUSD remains bearish on the daily timeframe and this rebound may extend to the 61.8% Fibonacci retracement level around 1.53 before sellers bring prices back down towards the relevant 1.5100 support.
Commodity spotlight – WTI
The combination of the persistent and clear signs of there being an aggressive oversupply in the markets and sluggish demand for the commodity due to global concerns have consistently punished the value of WTI oil sending it two month lows below $40. Investor sentiment towards WTI is weak and this relief rally may offer an opportunity for bearish investors to send prices back below $40.
Technically WTI is bearish on the daily timeframe and the previous support at $42.50 may act as a dynamic resistance which should invite an opportunity for sellers to send price back down towards $39.00.
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