Entire Commodity Complex Faces Increased Downside Pressures
Gold prices broke their 10-day losing streak and settled 0.2% higher at $1,094.10 an ounce yesterday before dumping again overnight. Oil futures fell 1.5% to settle at $48.45 a barrel, its lowest level since March. The slowing Chinese industrial and production growth have contributed to steeper losses in base metals. Quickly following overnight was the weakness in natural gas catching down to the softness in crude oil prices. Just after 02:00 GMT gold prices smashed approximately 0.50% lower before recovering modestly and experiencing another wave of selling after 03:00 GMT which saw gold give up another $6 points.
The UK pound has gained ground as fast GDP growth via strong fiscal and monetary policies have started improving the balance of payments. The Bank of England is currently preparing market participants for higher interest rates sooner rather than later. However, weak retail sales figures have dented recent momentum higher in the GBPUSD pair as the dollar benefits from renewed safety flows. While policymakers are unanimous in their support for holding interest rates constant, concerns about a quicker than anticipated rise in inflation could contribute to a shortening of the timeline for further interest rate increases after many years operating at 0.50%.
Chinese manufacturing data released overnight showed that the economy continues to sputter despite all the accommodative actions taken by policymakers and then Central. Manufacturing fell to the lowest level in 15-months according to the HSBC PMI with electricity consumption growing at the slowest pace in 30-years. Efforts to stem the decline in stocks have seen policymakers allocate the equivalent of 10% of annual GDP to prevent a collapse in equity valuations has proved largely ineffective. Investor confidence is strongly influenced by the volatility of markets, something policymakers will be forced to tackle as the challenges grow.
USDCHF Upward Trending Channel Trading Opportunity
Renewed safety bids have seen the dollar rise against major currency peers as investors flock to the haven instruments as global fundamentals continue to crumble. The dollar has broadly benefited after experiencing modest softness earlier in the week on the back of revisions to macroeconomic data including industrial production and capacity utilization. However, the dollar has since rebounded, with the USDCHF ticking higher in an upward trending channel pattern. The formation has a bullish bias with ideal positions taken near the lower channel line targeting the upper channel line. Fighting the channel is not recommended due to the shrinking reward potential and expanded risk factors.