The British Pound fell victim to an aggressive sell-off last week, after the Bank of England doves dominated August's monetary policy committee meeting. Sentiment towards the Sterling was already bearish amid Brexit uncertainty and the downgrade of economic forecasts by the BoE simply rubbed salt into the wound. With political risk, soft economic data and Brexit woes- all punishing the Pound, further downside is on the cards. From a technical standpoint, the GBPUSD is coming under increasing selling pressure on the daily charts. Prices have crashed over 200 pips from the 1.3267 11-month high and could drop further once the 1.3000 support level is breached. Technical traders will be paying very close attention to see if bears are able to secure a daily close below 1.3000, which should open a path towards 1.2850.
Dollar bulls offered NFP lifeline
The Greenback sharply appreciated last week Friday following news that the United States added another 209k job to its economy in July. This was an overall positive employment report that continued to highlight the underlying strength of the US labor market. With the headline NPF figure exceeding expectations, average earnings rising by 0.3% and unemployment rate dropping to 4.3%, Dollar bulls were thrown a lifeline. While the Dollar could find further support if economic data from the US follows a positive pattern, gains are likely to be limited by the heightened political jitters in Washington. From a technical standpoint, the Dollar Index remains bearish on the daily charts as there have been consistently lower lows and lower highs. A breakdown back below 93.00 may encourage depreciation towards 92.00.
USDJPY remains range bound
The USDJPY has found comfort in a 100 pip range with support at 110.00 and resistance at 111.000. Although the pair is currently trading within a range on the 4 hourly timeframes, the trajectory remains tilted to the downside on the daily charts. A vulnerable US Dollar is likely to pressure the USDJPY further while a strengthening Yen amid the risk aversion should encourage sellers to install fresh rounds of selling on the USDJPY. From a technical standpoint, the USDJPY fulfills the prerequisites of a bearish trend on the daily charts as there have been consistently lower lows and lower highs. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. A breakout above 111.00 should encourage a further incline higher towards 111.600. In an alternative scenario repeated weakness under 110.00 should open a path back to 109.00.
Commodity Spotlight – Gold
Gold has attracted a school of sellers following July’s impressive NFP report which rekindled expectations of another US interest rate hike in 2017. A resurgent Dollar compliment the downside, with prices trading towards $1257 during Monday’s trading session. Although risk aversion from political jitters in Washington may support the flight to safety in the longer term, the renewed rate hike expectations are likely to pressure the zero-yielding metal further. From a technical standpoint, Gold bulls are at risk of losing control if prices stabilize below the $1260 level. Repeated weakness below $1260 should encourage a further depreciation lower towards $1240.
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