Article by ForexTime
It looks like the endless roller-coaster that is a reversal of US interest rate expectations is set to continue after the US economy received a magnificent boost following the news that 255,000 jobs were added to the US economy over the month of July. This is a much stronger headline number than what was expected at around 200,000 and should lead to another re-pricing of US interest rate expectations once again which should also provide positive momentum for the Dollar as we continue into August at this stage. The Federal Reserve have clearly outlined a public bias and commitment towards raising US interest rates in 2016 despite an uncertain external environment, however another strong headline NFP reading will make investors at least reconsider that fact that maybe a US interest rate rise in 2016 is possible after all.
Gold has moved $20 lower at the time of writing and away from its recently returned pre-Brexit levels above $1350 as a result of a sudden momentum of Dollar strength. There is still a distinct likelihood due to the ongoing external uncertainty that Gold can move higher over the medium and longer-term, although this increased optimism over the US economy and momentum for the Dollar has taken some of the shine away from the asset as least for now. The same could be said for another precious metal, being Silver and it appears that both metals are going to at least reverse some of their gains early in the week following a sudden buying spree from investors for safe-haven assets.
I am paying close attention the GBPUSD because we are now looking at an increased threat at closing below the major support zone mentioned at 1.3050. This is the key technical signal that traders are likely looking for as encouragement that the GBPUSD can return back towards its milestone lows, technically it is looking more possible as we fall below 1.31 at the time of writing however we need the trigger to be pulled by a clean close below 1.3050 as weekly trading concludes. Fundamentally the longer-term direction still appears firmly directed towards sellers and the resumption in optimism over a possible US interest rate hike before the end of 2016 should lead to a policy divergence between the two currencies now that the Bank of England (BoE) have confirmed that they are moving in the opposite direction through easing policy to record levels since the unexpected EU referendum outcome.
The Eurodollar has also fallen quite sharply since the NFP announcement, from 1.1160 to as low as 1.1080. The Dollar should gradually regain most of its lost momentum after the sudden profit-taking a few days ago, which should continue to encourage the Eurodollar to pull away from its peak found a few days ago at 1.1232 and a little closer to 1.10. We still probably require an upbeat statement from the Federal Reserve in reaction to the jobs report to send the EURUSD below 1.10 for a meaningful period of time, which would provide comfort to the European Central Bank (ECB) who would clearly prefer the Euro to maintain itself below 1.10 for a meaningful period of time.
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Article by ForexTime
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